Over the last several months the company I work for has been in the process of being audited for taxes by the state. Last week the audit was completed. For the time period allocated we had 10 million in sales on the books. Our company is a small business owned by wife and husband. The wife takes care of the books and capital and the husband takes care of operations. Both were extremely stressed during the audit as you can imagine.
The final outcome from the audit revealed that that we failed to pay $127.00 on equipment purchases through our normal suppliers by not charging our customers the appropriate tax. However they also found that we did not pay the appropriate taxes for items purchased over the internet raising our total tax for the 10 million in sales to 3K.
The auditor revealed that the process was escalated due to the fact that they were not finding sufficient discrepancies. They looked a lot closer at all of the books trying to find errors. The auditor stated that the state had amassed over 500 hours of state employee time on this audit. She also stated that her supervisor was not happy with the outcome and I can understand why.
Over Five Hundred hours of State employee time were utilized on this audit. Most were salaried and all were state employees with good pay and benefits spending over 500 hours of government time for a reward of $3,000.00. The total compensation that the state received for conducting this audit was less than $6.00 per hour. What do you think the total compensation for 500 hours of state employee time (including benefits) actually cost? My guess would be upwards of $30.00 per hour average.
The owners will be very happy to write the check for 3K to government even though it cost us many hours ourselves for the time to gather the required documents and data requested as well as meetings and the overall stress involved in this endeavor.
And I bet they come back next year and try it again just for giggles!