Pen-Elayne on the Web

The Strange Audit on the Corner

My guest-blogger and tech-support person and friend Laura Gjovaag, who's done a magnificent job on Bloggity-Blog-Blog-Blog covering the Marysville teachers strike, has brought another very important situation to the blogosphere's attention. Her local comic shop owner, Paige Gifford of Corner Comics, is in the midst of an IRS "compliance audit" - Laura picks up the story here:

The brand-spankin new agent they had put on her case didn't believe she could make a living selling comics. Once she was able to prove that she was in compliance, and not selling something on the side, and that yes, she did make a living selling comic books, the agent went after her inventory. He said that he knew how much baseball cards are worth, and so old comics must be worth a lot of money. He estimated how much her backstock was worth (based on his own bizarre calculation). He then told her that she hadn't paid taxes on her inventory, and that she owed $14,000 in taxes. She's a small business owner. $14,000 is a lot of money.

So she got some help. At times the thing seemed almost resolved. But the IRS is determined to run her out of business. Within the last week she was told that she cannot have any backstock of comics. She has to destroy her backstock - shred or burn every comic book - by December 31st in order to get out of the debt. And she needs a receipt to prove that she destroyed the comics. Otherwise, she owes the IRS $14,000, and will owe the IRS an inventory tax every year from here on out. Even though her lawyer and accountant are convinced that she's completely in compliance with every pertainable law.

I don't know about you, but if this audit is applied equally and across the board on all small-business owners, I don't think there will be any bookstores or comic book stores left that are locally owned. You cannot have a decent comic shop without backstock, and according to the IRS, backstock is NOT ALLOWED.

Read the follow ups here and here in Paige's own words and here and here. Maybe economist types like Max are more up on this type of stuff than me, but this doesn't sound like any audit I've ever known about, it just sounds like plain and simple harassment, and it ought not be legal.