Day 4 – Character 4: An audit of the A-team
Hannibal walked into the apartment where Face was currently residing. “Face,” he called. “Guess what my lawyer gave me this morning? It has your name written all over it.” Hannibal hands Face the letter. “The IRS? Really? As if Decker on our trail isn’t enough heat.”
“Hannibal” says Face as he takes the letter, folds it in two, and puts it into his inner coat pocket, “Relax. I got this. I can charm any auditor and make all our troubles go away.”
After Hannibal left, Face pulled out the letter and read it. It said:
NOTICE OF AUDIT
April 1, 1984
Attention: Lt. Templeton Peck
Upon reviewing your current tax return, we have decided to conduct an audit of all your tax returns for the previous 3 years. Please have all documentation supporting your entries available within ten days of this letter. An auditor will meet you at this address……Beverly Wilshire Hotel ……. at 9 am.
One week later….
Face walked into the hotel with his briefcase. He was meeting the auditor in the conference room in the Beverly Wilshire hotel. When he got to the conference room, he noticed that there was a table and two chairs, but no auditor. As I walked into conference room, I greeted Face. “Good morning. I am Racquel Sevigny. I will be conducting your audit. Let’s get started.”
“My first question: what entity type are you filing under? I am trying to figure out whether you should be filing as a partnership, sole proprietors, or as a corporation. It is just not clear on your tax return and will clearly impact the length of this audit.” I walked over to the table and indicated that Face should have a seat in the other chair. “Well,” he said smiling, “I filed as partnership. We paid all of our taxes… as you should have seen on our returns.” He sat down, leaned back in the chair with his arms crossed, and smiled.
“Yes, I saw that you paid the social security and FICA on your 941 returns. You do know that social security is part of FICA, don’t you? Therefore, you have overpaid those taxes.” I looked at him as I sat in the other chair at the table, placed my bottle of water on the table, and opened my briefcase. “Do your teammates know that you overpaid your taxes? Are you skimming money from all those jobs you and the others got paid for over the past 15 years? I understand you received both cash payments and interest in the profits when the clients couldn’t come up with your fee. That’s an awful lot of cash to keep track of.”
Face leaned forward, smiled, and said, “I invested the profits for the group. We have many interests. I oversee all of them, especially the ones with the ladies.” He winked as he finished the last sentence, thinking this might soften me up.
“I am not amused, Lt. Peck. You seem to think that you and the rest of the members of your team can do whatever you want, regardless of whether or not it is legal, and we will just look the other way. I assure you, we will not. Now,” I said as I set the notepad I had taken out of my briefcase on the table, “answer these questions.” I read off a list of questions prepared by my team in preparation for this audit. “How many businesses are you part owner of? Where are the Schedule K-1s that should accompany the 1065? I see in my notes that in prior years, you had a restaurant in Chinatown that you claimed to be part owner of. Where’s your inventory list from that restaurant? You can’t just put the income on the form without the details. There’s $50,000 listed as earnings on the form. Are you expecting me to believe this is the income you are claiming for the whole team?” I set my pencil down on top of my notepad and looked over at Face. “Really, Lt., with all those business classes you took, you should have taken a tax class. This would be much easier for both of us then.” I stared at Face, waiting for him to answer the questions I had just asked. I was pretty sure that what he was going to tell me wasn’t going to be the truth, the whole truth, and nothing but the truth. It was going to be a long afternoon sorting out these details…
“Well,” drawled Face, “what can I say? I’m sure there’s a good explanation for each question. Can we go over them one at a time? That way I know exactly what you are looking for…”
“Sure. What did you bring with you today? I believe your notice said to bring all pertinent documentation with you.”
Face picked up his briefcase, set it on the table, and opened it to take out a pile of financial statements. He set them on the table between us. “Here is our income to back up the calculations on the tax form.”
I picked up the top financial statement and glanced through it. “What about the bank records and Schedule K-1s to go with this business? This is from the restaurant in Chinatown. As a restaurant, they should also have an inventory worksheet. Where is that?”
“Uh, those. I must have left them at the office,” Face said. “Let me go get them” and he started walking towards the door.
“Halt. You may use this phone to call someone to bring those documents, but no way are you leaving my sight.” I replied.
“Not even to use the restroom?” Face inquired as he frowned at me.
“I will have a colleague supervise you. I don’t trust you not to con your way out of here,” I replied.
He walked back over to me and grinned. “Do I look like the kind of guy that needs to sneak away from a pretty girl?” I sighed, handed him my phone, and said “make your call. The sooner we finish this, the better it will be for both of us.”
Face picked up the phone and dialed a number. “Hannibal, can I talk to Murdock?”
“Not going so well, Face?” responded Hannibal, “what happened to the ‘I can charm anyone’ attitude?”
“I’m working on it, Hannibal. It’s just taking longer than I expected.”
“You’re losing your touch, Face. I’m really starting to worry about the gift of gab that you have.”
“I’m working on it,” repeated Face as he watched me listen to his conversation. “Let me talk to Murdock, please.”
“Hi, Faceman. What can I do for you?” said Murdock.
“Murdock, listen to me. You know, the blue folders sitting on my desk. I need you to bring them to me.” Face waited impatiently for Murdock to confirm that he found the files. “Good. Good. I will let Racquel know that you will be here in 30 minutes.” Face hung up the phone, laid it on the table, and smiled. “I’m assuming you heard all that Murdock will be right here. See, no problem.”
“Right. No problem,” I responded. “We’ll see.”
“While we wait, do you think I could use the restroom?”
I picked up the phone and sent a text to my colleague who was conducting another audit close-by. “My colleague will be here in a couple of minutes. Surely, you can wait that long,” I tell Face as I read the response to my text.
“I think I can manage that, but you know that you could always supervise…” Face said as he stood up and walked over to one of the windows in the conference room. “By the way, what made you become an auditor?” he asked me as he turned around with his hands in his pockets.
“I liked auditing in college. It was like putting a puzzle together; trying to make all the pieces fit without forcing them.”
A couple of minutes later, there was a knock on the conference room door and my colleague walked in. “Hi, Mike. Thanks for coming. Watch him carefully. He’s liable to try anything to get away.”
Face walked over to Mike and said “yes, I’m so dangerous. You should have Racquel come with…” I shook my head as the two of them walk out of the room.
A short time later, Mike and Face returned to the conference room. “Any problems?” I asked Mike. “None that I couldn’t handle” Mike replied as he shoved Face back into the conference room. “Watch it,” said Face, “I bruise easily.”
“Mike, there’s guy by the name of Murdock that should be here soon. He’s bringing Lt. Peck some documentation that seemed to be left behind. Could you please see that he finds us? I wouldn’t want him to get lost and detain the Lieutenant needlessly.”
Ten minutes later, Murdock walked in with a pile of blue file folders under his arm. “Hiya, Face.” Murdock greeted Face as he handed over the folders. “She’s pretty. Can I stay and watch?”