Robin's Ruminations

Multiple process serving agencies are under audit by L&I.  Unfortunately, some of them may not fair very well because of their business practices when it comes to using IC's.  Even companies who are in relatively good shape are finding the audit process difficult and time consuming.

I've learned through the Independent Business Association that L&I is targeting the construction industry and the service industry.  Both are known for paying cash to employees and for using independent contractors.  Both practices are considered red flags by L&I.

And don't think L&I is wasting our tax money with all the time spent on the auditing process.  The return rate is about $8 to $1.  In other words, for every $1 the state puts into the audits it sees an $8 return.  My business should be so profitable!

You'll find thorough descriptions of how L&I looks at IC's elsewhere in this blog so I'm not going to repeat it here.  That said, you need to know that perhaps the most important aspect of using IC's is to make sure they are licensed as an independent business with the state.  This is simple to do at the Department of Revenue's website.

L&I has a list of documents they'll want to see.  These include payroll ledgers, check registers, general ledgers, profit and loss reports, IRS forms (940, 941, 1040, 1065, 1120, 1120s, and W-3), cash disbursement journals, contracts, invoices (both payable and receivable), and the list goes on.  They don't want to see these for just a few days worth of work - they want to see anywhere up to and including 3 years worth of records.  For many of us small time operators this alone can be devastating in terms of time and lost productivity.

I'm using attorney Jennifer Willner for advice on my audit(s).  She helped the Rustands in 2008 and 2009 with theirs.  And she spoke at the WSPSA Annual Conference a couple of years ago.  She knows her stuff on this topic and I'm following her advice.  Her number is 360-392-3995.  Who ever you use for advice and guidance make sure they are experienced in the audit process.

If you think your situation might rise to the industry level then consider bringing it to the attention of WSPSA.  The Association helped the Rustands last year and the result was a new WAC just especially for process servers.  But if you've simply not been doing things the right way.....well then you're probably going to have a problem.

Based on advice from Ms. Willner, and from personal experience, I recommend you make every effort to cooperate fully with the auditor when your turn comes around.  Supply all the data they want and, literally, make the process as easy as possible for the auditor.  You will get no where if you piss them off (excuse my French).  If you get obstinate about turning over records they'll simply slap you with a subpoena and that is not what you want to have happen.

I've had some success in politely, but firmly, negotiating with the auditor.  Believe it or not they do have a heart and it is not their job to put you out of business but they will if they have to.  Most of them don't understand our industry and they use boiler plate forms with wording that sometimes just doesn't make sense to us.  Don't be afraid to ask questions and for clarification on anything which doesn't make sense to you.

I recommend that all communications, prior to the actual audit meeting, be in writing.  Use e-mail for most of it and certified mail, return receipt requested, for really important things.  It is vital you have a record.

My first audit meeting is next Wednesday, June 2nd.  I fully expect things to turn out just fine.  I'll keep you informed.