True, Scary, Funny Tax Stories

In the spirit of All Hallow’s Eve, Halloween, All Hallow’s Even, Samhain, All Soul’s Day and All Saint’s Day, here are a few true, maybe scary, but definitely funny tax stories.

In California, lessors have the choice to pay tax when they purchase a property/good intended to be used as a rental and not charge tax on the rentals; or to not pay tax when they purchase, and instead collect tax on the rentals.

Auditor #1 was discussing his audit findings with Auditor #2. Auditor#1 said that the taxpayer had not paid sales tax at the time of purchase nor charged tax on the rentals, so he was assessing tax on the purchases AND the rentals.

Auditor#2 explained this wasn’t correct—it’s an either/or situation.

Auditor#1 says, “But the taxpayer already agreed!”


**Fictitious names have been used

When training new auditors, audits are conducted “by the book,” so certain steps are performed that normally might be skipped by a more senior auditor.

During a training audit of “In Sight,” a clothing store, significant resales were noted being made to “Outa Sight,” another clothing store. We determined to also investigate Outa Sight to see how many sales Outa Sight was reporting.

We found that they were reporting about half as many dollars in sales as they were buying from In Sight. Since not many companies stay in business by buying twice as much as they can sell, we decided to audit Outa Sight.

Outa Sight’s records showed that their sales information agreed with the sales tax returns they were filing. We showed the owner copies of the invoices where they had purchased all the extra clothing from In Sight.

Outa Sight’s owner responded, “I’ve got 2 other sets of books; which one do you want to see?”

Us: “Which one is correct?”

Outa Sight: “Well, one is too high because I use it at the bank to get loans. One is too low, that’s the one that you have now.”

Us: “So, give us the third set.”

Sales were scheduled from the third set of books and additional tax assessed in the audit. When we told the owner a fraud penalty would be imposed, his response was, “What do you want me to do, cry?”

*Stories courtesy of anonymous former auditor