Home Inspection audit

Joe,

Who opinion is this? Is this from some person in the state department?
This is why we asked Dan to check on the inside track if he could. It would be nice especially for the ones of us who a sole proprieter and do not have the 1099 or W-3 Forms.

Rick

I Spoke with the NYC auditing group today, apparently they had no idea prior to a couple of days ago how we were paid. I explained that we don’t have 1099’s or W-2’s, but we do have inspection agreements that have the dollar amount on them and are signed by the client. I asked if sending the agreement for each inspection and a copy of last years tax return would be sufficient. They don’t have a clue… but they said they were going to have to have a meeting about this and would call me back later today or tomorrow. No call this afternoon… I think they are trying to decide what they need.

Then I went thru the exact same procedure with our group in Albany, they said to talk to NYC DOS (who is doing the audit). I explained that this customer service # was going to be over run with calls over the next week with this question… so she brought my question to the head of the department. She told me she would call me back when they made a decision on what proof to accept. Again… no return call… So both offices are talking about this issue and no decisions have been made. I have a feeling last years tax return showing income from your business will be sufficient. Not 2005 but 2004 tax return, they know we don’t have returns back from the accountants yet for 2005.

So hopefully tomorrow they will call me with their decision. I don’t think they saw this problem coming, and neither did we.

Dan

To everyone who is interested,

I received this email today. I was using another avenue to look at this situation. Read this with open ears, if I hear anything different I will definitely pass it on.

Rick

Hi Rick, What you heard is true. The people in Albany are not really in touch with reality. In some instances as an alternative they have asked for income tax returns for the years for which you are claiming inspections. Or, they have asked for inspectors to provide signed and notarized affidavits from the clients whose reports they have selected. This is obviously virtually impossible and a terrible imposition on our clients. They may be convinced to accept signed inspection agreements. All of this is up to individual negotiations with the DOS. We are working on it as we speak, but a definitive protocol has not yet been designed. Keith

Rickey, thanks for the update

Mic

In reply to Dennis T., I hand carried my package to Holland Ave office the day before Turkey day. The looked at it, made a couple of suggestions, and I delivered it on Thanksgiving Friday. The license was rcvd by post 3 days before Christmas. My concern is now, as it was last summer, the privacy of my clients. I had a strong feeling somebody in the state would take this as an opportunity to attempt to contact the clients. Now, one of the posts indicate the govt may be requiring an affidavit! In either of these situations:

  1. Where is client privacy?
  2. What if the sale did not go thru for whatever reason? The client won’t be at the subject property address.
  3. If the inspection was done for an investor, is the state going to be bothering the non-owner occupant?
  4. Is the tax department trying to determine how much they can tax the occupation?
    I think the reports should be blacked out as to any information pertaining to the client, address, telephone number or transaction fees. The executed contract should suffice as evidence that an inspection was conducted. The state is trying to put together a total paper trail based on info in this thread. They want call sheet form initiating the inspection, contract, invoice, inspection and our financial paperwork. It appears forensic accountants are doing the audit, not people having any awareness of this occupation. They need, in my opinion, only to read the report and the contract to determine the work requested by the client was done. I say that because not all clients want a full inspection but rather a limited scope inspection;ie: “I am buying the place as an investment property. Only concern is the structure because I know the electric is obsolete and the plumbing is dated. I’m gutting the place and redoing it as three student rentals” I hope our NACHI lawyers get all over the DOS on this and keep the Taxation people out of it. Good luck to all of us here in New York, one of the top most business unfriendly locations.
    Maybe we can sic em on the home remodelers, builders, carpenters, plumbers, landscapers and general home handymen too! All it is, IMHO, is a big money grab.
    Thank you for letting me vent. I think I feel better.

It’s quite interesting because, as far as I can tell, one does not have to actually register a business in NY State to conduct business. Where sales tax is not required to be collected (as with home inspections), there is not requirement to get a sales tax ID number. Where someone simply reports monies collected as ordinary income, and pays the self-employment tax rate, the Feds dont really care. This is especially true for “part-timers”.

The process may be an interesting one. Though somewhat foolish, in my opinion, there is no requirement to use an inspection agreement.

As a fee paid inspection can be for $1, it muddies the waters even further, I’m afraid. This is especially true where many inspectors seeking some level of grandfathering, were performing inspections for $1, just to get the quantity performed up to the required level.

We do need to speak to these folks, I’m afraid, as we want to ensure that they get the inflrmation they need, relative to licensing, while having the inspector have all rellevent documentation at the ready.

OK, just got off the phone with the guy in charge in NYC for the auditing… here is what he says,

Send in the report, but just the report will not be enough… if you have a signed inspection contract with that deal then send it in also… if you do not have a 1099 or w-2, just hand write a note saying you are not paid that way… write a brief description of how you do your business… if you have a business checking account, send a statement in for that, if you have a tax return from 2004 SHOWING YOUR BUSINESS INCOME, send that in… send in what ever you have to show how you do your business… when they get all of the reports with the financial documents they will review them, if they feel that you are legitimate, and not trying to pull something over on them they will ok it… if they feel you are trying to pull a fast one, they will contact you back and ask for more info… if they then arent satisfied, they will kick your case back to DOS Albany, and have your license put under review, you will then be contacted by DOS Albany and given another chance to show your records…

So, basically send in what you have to show that you are actually in business. He kept emphasising that they are not trying to put anyone out of business or bust any balls, they just want to make sure only the qualified are licensed.

Dan

When I sent in the package, I personally included more than they asked for. I sent in my DBA dated in 2001, the list of inspections I have done, and all my educational certifications. Now if they want the reports and financial I will give them what I can come up with.
The biggest question I have is do we need to go back and have the release authorization for the report from our clients?
How long does it take to hear from the state on this situation.

Rick

The Albany office got back to me this morning, and she said if we do not have 1099’s or W2’s just send in a copy of your 2004 tax return.

Dan

How is everyone’s audits going? There has not been any mention of this lately. Just carious about this transaction.

Rick

Apparently most of the NACHI members who have been audited passed with flying colors. Len Ungar is having a meeting on this issue on 2-23-06 and Pat Maietta is having a meeting on 2-28 as well.

I am sure it will be a discussion item, with all the questions raised about 1099’s, w-2’s etc.

The state seems to keep it very simple for module 5 however. Once you get your 40 hours of inspections, the school can issue you a certificate for module 5.

Hope to see everyone at the NACHI chapter meetings.

I never received any letter from NY requesting audit info, are they auditing everyone with NY state home inspectors lic or not.

Apparently everyone who used the Grandparent provision (used to be known as grandfather provision) is subject to an audit, which will include samples of your inspections as well as copies of your income tax returns, w-2’s, 1099’s, etc. Whatever you can show to let the state know you were and are in the business and actually did these inspections for a revenue.

I was told, however I don’t know if they have the resources for it that everyone who filed will eventually be audited.

I am hoping that they are only doing random audits, but over 20 people I have talked with are presently in the midst of their audit.

Good luck with the potential audits. Keep everything simple. Get your returns from your accountant, and be ready to give them documents when and if you receive the audit letter.