[Joe Lauzon]

A friend of mine felt the wrath of the IRS, I thought I'd share the story.  Look away now if you have something to hide or you might not sleep tonight!  Just kidding, this is the only time I've heard of a one man band window cleaner being investigated.

Here is the scenario.  My friend is a single man 43 years old, in a nice 4 bed detached mortgage free.  He has plenty of excellent top end window cleaning work.  Works around 45 hours a week - 50% more than me!     He declared 44k last year.  You'd think they'd be happy to let him get on with it!  I think he earnt more like 55k, he is pretty much the top earning one man band in the area I know of.

So, he gets a call from the IRS, they want to see his books.  Fear hits him like a bucket of water.  He buys some time.  By the time the IRS guy walks in the door his books are tip top, and appear water tight.  I had a good look over them. 

Apparently what attracted the IRS attention was his expenditure.  He had just paid 11k for a nice van, plus had recently upgraded his wfp equipment.  Mr IRS wanted to see his van, to see its was all it was cracked to be.  Looked at the equipment.  Spent an hour or two on his books.  Ate half a pack of short bread, and left saying what a professional job he made of his books.  Happy days.

Not quite.  A week later he gets a call from his supplier.  IRS had been sniffing round, checking the equipment he had bought.  At this point it comes to light that he actually paid 9.5 for the van, and added 1500 quid on.  Well this IRS guy went to the previous owner and found out what it had been sold for. 

This came to light when a bill and fine, dropped on his door mat for 10 and a half grand!  As they believe he had deliberately tried to deceive they slapped a nasty fine on him.  7 times the amount he tried to deceive!

He paid it, but is a marked man now.  He was investigated again the following year,  and came up clean.

Lesson to be learned there.

[steve m]

when you get one for 18k, then he can start worrying

[Joe Lauzon]

when you get one for 18k, then he can start worrying

You got one for 18k Steve?  How did that come about?  Thats horrific.  Did you pay it?

[TennetClean]

they'll get you with expenditure every time.

They dont look TOO closely at income, because they know that if you're fiddling you'll hide income.  But it is much harder to hide money that has been spent.  This is how they get criminals.

I knew of a guy who owned a swimming pool company and happened to get investigated.  All came up clean, BUT they then went to every one of his customers that he'd installed a pool for, knowing how much it costs to have a pool done.

Turns out loads of em got done because the expenditure (even though it was in cash) did not match the income.  I think they were a shady lot like, but even so it goes to show.

Personally I would not want the feeling of fear of getting caught out having done wrong.

Best advice: Honesty is the best policy.

[pingu]

Personally I have started off in this industry with the intent of being 'clean and transparent'.

Most payments from customers are paid into my bank account and I get about 100 pound per month in cash....

Better to be safe than sorry...

too many clever people get caught...

But on the other hand if I were operating from a mobile number only and did'nt need  to obtain credit..of course I would cash in hand and thank-you mam.

Dave.

[Joe Lauzon]

Personally I have started off in this industry with the intent of being 'clean and transparent'.

Most payments from customers are paid into my bank account and I get about 100 pound per month in cash....

Better to be safe than sorry...

too many clever people get caught...

But on the other hand if I were operating from a mobile number only and did'nt need  to obtain credit..of course I would cash in hand and thank-you mam.

Dave.

It has to be a tough job for the IRS.  If I was looking at you, and you told me you were taking only 100 in cash as a w/c, I'd be suspicious.  I don't think we can win in our game.  Like you, I take more cheques than cash.  I've been told that they tend to expect a certain percentage to be taken in cash, if it isn't they have raised suspicions.

You take a w/c who is taking lots of cash, from the outside he may look the good guy, even if he is only declaring 60%!

[Helen]

This came to light when a bill and fine, dropped on his door mat for 10 and a half grand!  As they believe he had deliberately tried to deceive they slapped a nasty fine on him.  7 times the amount he tried to deceive!

And here endeth the lesson for all those on here who have previously been warned about claiming to earn this that and the other, whilst doing a few nice cash earners away under the bed.
You can only spend what you bring in. So the moment you claim earnings of £20k but there a nice new BMW complete with speed boat sitting on the driveway, alarm bells start ringing.

[alanwilson]

I have known people to be investigated by the VAT man, believe me, the VAT man is 100 times worse than the income tax man.

A friend had the vat people round his gaff for nearly 3 months solid, in that time they wanted every receipt, transaction, you name for the last 7 years.  He was suicidal by the time it was over (and I do mean suicidal), then they came back again for 3 weeks the next year just to make sure it was all kosher.

In the end they found nothing as he had played it by the book and been very honest but it all came from one dispute with a neighbour who claimed my friend had sold hundreds of vans when in fact he had be lucky to sell a van a week.

As he is VAT registered its the VAT man who investigates, its an appaling process, they literally go through every drawer in your house, in your attic, through your missus knickers, the whole lot - they will even go through your childrens cupboards, look at their bank accounts, empty out their money box - whatever it takes.

Just a thought - if you don't declare 100% then don't keep all your receipts, and lets be honest here, how many of us declare 100%?  I try to but I know I'm still short from time to time.

[Joe Lauzon]

I'm quite shocked by that Alan, I never knew it was that intense.  I imagine being a VAT man is quite a dangerous job.  I bet some people develop some real hate for them, its sounds like it can get quite personal.

[alanwilson]

I'm sure its not as intense as that all the time but I've been informed it can be EVEN worse than that!

The friend in question basically gave up his business after that - too much trauma for him, they even contacted previous buyers (as per tennetcleans post) to see how much they had paid for vans etc.

He had to explain to them a receipt from an off-sales that was about 2 years old - who it was for, why, what did they buy, was it business orientated entertaining.  Absolute madness, just goes to show the government is more interested in taking money off us than actually punishing real crooks.

[steve m]

sorry dozed off. still trying to get it down. If you get your books down to the limit, and they think that your lying they just want to inspect your books for the last six years, then while your spending bundles on a real good accountant to sort it for you they hit you for £600 fines every quarter. Once theyve finished I spose I'll have the vatman on me

[maxwe11]

1 fact they can not touch or use your computer
so id be suprised if they can go through someones personal property eg search rooms etc

[alanwilson]

maxwell I can assure you they can - they will ask you first but if you say no then its a case of waiting on a warrant froma magistrate.

I've seen it happen to a friend - there's no way I want it to happen to me.

[maxwe11]

i gave permision for them to use my pc and was told they can not
this is what happened to me may be diffrent for others ??

[alanwilson]

no I mean they can go through cupboards, drawers etc - I have no idea if they can touch your pc or not, but then I guess a magistrate could issue an order for it anyway

[Londoner]

The tax man can't search your house or look in your computer but the VAT can. They can enter your house WITHOUT a warrant and seize ANYTHING they think is relevent.

[maxwe11]

as above 

[Neil271052]

I agree about the VAT man which is why I have always steered clear by keeping below the threshold.

Basically you become an unpaid tax collector for the government. 

I have known two disparate businesses that have run foul of the VAT (fashion and a cafe) and as previously stated the owners became near suicidal, one having a nervous breakdown.

Stay away from VAT (if possible) and be 100% honest in your income tax is my advice. 

[Helen]

I agree about the VAT man which is why I have always steered clear by keeping below the threshold.

Basically you become an unpaid tax collector for the government. 

I have known two disparate businesses that have run foul of the VAT (fashion and a cafe) and as previously stated the owners became near suicidal, one having a nervous breakdown.

Stay away from VAT (if possible) and be 100% honest in your income tax is my advice. 

That's ok if you can keep under the threshold.
But again, the same honesty policy should apply for peace of mind.

[elite mike]

The tax man can't search your house or look in your computer but the VAT can. They can enter your house WITHOUT a warrant and seize ANYTHING they think is relevent.

the vat ,has more powers than the police ??