Expert: Richard Stolp - 11/22/2008

Question
Hi,
I have a small C corp. I own a trucking business and own a shop that I do all the work on my truck in. Every month  I pay myself a rent check from my business checking and deposit the check into my personal checking account. On the check I write "shop rent." My CPA told me this is legal to do. Is it? Also, where am I supposed to show this money? On my personal taxes as income? I work for the corp. and pay myself a check every week. Then once a month I write myself a rent check from the business.
Also, I know the time limit is 3 yrs. for an audit after tax returns are filed. But what is the average time for an audit after tax returns are filed? I read somewhere that most audits are performed within 18 months after taxes are filed.
Thanks for taking the time to answer my questions.
Sandra

Answer
For you the rent needs to be shown two ways.  First it can be shown as a business expense.  Second, since you receive the rent, it also must be shown as income on your personal taxes.

My experience on audits is that the first wave of audit requests goes out in about six months of when you submit the return for processing.  A second group of audit requests go out later - the later ones are those that require some research on the IRS's part before they make the request.  The actual timing on anything the IRS does tends to vary depending on the work load and the number of people they have available to work - so your take at 18 months probably takes in 90%.  Finally, if the IRS believes there was some kind of fraud involved - they can go back 10 years.