What to Do if You Get Audited

No business owner looks forward to a letter from the taxman requesting a closer look at the books.

If you have received an audit letter – an official request by the tax authority to review your accounts and confirm your taxes have been paid to date – do not panic. Prepare and find the right people to help you – Accountants for Tax or Tax Accountants and bookkeepers.

These four steps will help you get through the process with minimal stress and the best possible outcome.

Respond promptly

 If you file your taxes reliably and pay on time, there is a good chance the government tax office contacted you for a spot check.

In this case, all that may be asked is that you provide receipts and answer a few questions. Give the tax office the information they have requested promptly so they can close the file quickly, and you can move on. Your bookkeeping team or your accountant are the best people to help you with this.

If an on-site audit is required, you cannot avoid the inevitable. Call to confirm the date and request any information the auditor will need to help you prepare.

Responding promptly and cooperatively every step of the way is the best strategy for getting through an audit. Reacting defensively or unprofessionally can invite more probing questions.

Seek professional help

Get in touch with your tax accountant as soon as an audit has been scheduled for advice and support. And if you have been handling the books on your own, now is the time to consider hiring a tax accountant. Your tax accountant who is preferably experienced with auditing services can help you with the preparation of your income tax returns and making sure that you report the items correctly.

A tax accountant can explain the audit process, help you get your bookkeeping in order, and offer personalized advice to help you prepare.

You may want to hire a tax lawyer if you have concerns that are beyond an accountant’s scope – if, for instance, you have unfiled returns, under-reported income, understated tax liabilities, or if you cannot validate all your expenses for the tax year in question.

Many tax lawyers offer a free consultation and can provide peace of mind by explaining your obligations and rights, and ensuring those rights are protected.

Get organized

An auditor will ask you to provide receipts that prove you qualify for any write offs you have claimed. On the day of the audit, be ready with your paperwork and be prepared to answer any questions.

Being organized and prepared shows you have done your best to report your taxes accurately. If your papers are in good order, and you do not raise any red flags, it is much more likely the auditor will wrap up once the audit’s basic requirements are met.

As a word of caution, only provide the auditor with the information they have asked for – no more, no less. Offering more explanation or “proof” in the hope of avoiding further questions may backfire, raising new ones. Stick to specifics. If there are questions you cannot answer, you can tell them that you will seek your tax accountant’s advice and will get back to them. In this way, you will have more time to accurately gather information.

Pay quickly

In the best possible scenario – your records are in order and you have been conscientious about paying your taxes – an audit will not lead to any unpleasant surprises.

If, however, an auditor finds that you do owe unpaid taxes, unless you have a solid reason to challenge the auditor’s findings, pay what you owe immediately.

You will avoid accruing additional penalties, interest, fees, and payments. Perhaps more importantly, you will be able to put the audit behind you so you can get back to focusing on your business.

Final thoughts

A final word to the wise: if you do try to fight the taxman, before pursuing legal action weigh the cost and benefit. Legal fees can add up quickly, so be sure the amount requested by the auditor – including interest and penalties – is worth what you will end up paying in legal fees.

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About Mizael Partners

Mizael Partners is proudly run by founding director, Ryan Mizael. Ryan and his team have been providing innovative accounting, auditing, financial advisory, tax and cloud-based technology solutions since 2002.

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