Tax audits are necessary evils. But what do you do when you’re looking down the barrel of one?
Tax audit: two words that can turn the hardest businessman to a dribbling baby. Every year, hundreds of thousands of individuals and companies alike find themselves receiving notification that the tax authority has decided to audit them. However, it’s not as bad as it sounds, and you will live to tell the tale… in most cases.
Tax audits range from minor queries to full-blown investigations that will turn pretty much the smallest stone over if there is even the slightest hint of deception and financial corruption going on. So, you know that drinks receipt that you turned into a paper plane during lunch with a supplier? You’re going to want to be hanging onto each and every one of those for the next seven or so years, because they could mean the difference between being cleared of tax fraud or being branded a tax risk and penalised.
The number one way to avoid being audited is to provide full, accurate and complete disclosure when submitting tax returns (even this doesn’t guarantee you complete immunity, though). By providing SARS with full information, they should be able to identify law-abiding citizens from those who’re taking a gamble and need to be audited.
When you’re up for audit, here are a couple of does and don’ts to help you through this process…
Do… have all of your paperwork in order (this includes any and all correspondence with the taxman)
Do… treat this is a serious matter and treat the tax representative with respect at all times
Do… have your accountant or financial officer present to answer any queries
Don’t… give the tax representative your original documents – rather provide them with photocopies
Don’t… even think about offering bribes – this is illegal and the dumbest thing you can do
Don’t… leave the tax representative to wonder around unsupervised and with access to your entire operation
Tax audits don’t need to be as painful as a trip to the meanest dentist on earth. If you’ve been honest, you won’t have any problems. If you’ve been a little more devious, though, this could be the beginning of a long and very, very expensive trip. If you didn’t know, most tax authorities penalise guilty parties at a rate of 200 percent… So, at the end of the day, tax crime really doesn’t pay.
