No business owner looks forward to a letter from the tax office asking for a closer look at the books. If you’ve received an audit letter – an official request to review your accounts and confirm your taxes are up to date – don’t panic. Prepare. These four steps will help you get through the process with minimal stress and the best possible outcome.
Respond promptly
If you lodge reliably and pay on time, there’s a good chance you’ve been contacted for a spot check – all that may be asked is that you provide receipts and answer a few questions. Give the tax office what they’ve requested promptly so they can close the file and you can move on. If an on-site audit is required, confirm the date and request any information the auditor will need so you can prepare. Responding promptly and cooperatively is the best strategy – reacting defensively or unprofessionally can invite more probing questions.
Seek professional help
Get in touch with your accountant as soon as an audit is scheduled for advice and support – and if you’ve been handling the books yourself, now is the time to consider engaging a tax accountant. They can explain the process, help you get your books in order, and offer tailored advice. You may want legal advice for concerns beyond an accountant’s scope – unfiled returns, under-reported income, understated liabilities, or expenses you can’t validate for the year in question.
Get organised
An auditor will ask for receipts that prove you qualify for any deductions claimed. On the day, be ready with your paperwork and prepared to answer questions. Being organised shows you’ve done your best to report accurately, and if your papers are in order and you don’t raise red flags, the auditor is much more likely to wrap up once the basics are met. A word of caution: only provide what they’ve asked for – no more, no less. Offering extra explanation in the hope of avoiding further questions can backfire and raise new ones.
Pay quickly
In the best case – your records are in order and you’ve paid conscientiously – an audit won’t bring unpleasant surprises. But if the auditor finds you owe unpaid tax, and you don’t have a solid reason to challenge the findings, pay what you owe promptly to avoid accruing further penalties, interest and fees – and to put the audit behind you. A final word: if you do intend to fight it, weigh the cost against the benefit first, as legal fees add up quickly.