What to Do When Faced With a Tax Audit

Tax Audit

There aren’t many things that scare an average taxpayer as much as the word “audit”. The idea of facing an auditor and explaining your financial transactions can intimidate anyone. An audit could also bring additional fines, taxes, and penalties that must be paid. As stressful as an audit may sound, there are various steps you can take to simplify the process. Here are a few things you can do to deal with an audit. 

Don’t Panic 

The first and most vital step to take in the case of an audit is to not panic. An audit isn’t a reflection on how you manage your business, it’s just an examination to ensure all your income is accurately reported and you followed all the tax laws. Several taxpayers head into an audit and come out without having to deal with any additional fees whatsoever. 

Understand the Kind of Audit You’re Faced With 

At times, you might not fully understand what is needed of you or your team, and this is where a financial accountant comes in. If you don’t have a financial accountant or tax attorney, you could always hire one. If you reside in Sydney, Australia, financial companies like Pherrus Financial are an option for you. You can get an expert tax accountant to analyse the audit letter. Ensure you don’t delay because this will make the auditor antagonistic. 

Acknowledge That the Process Might Be Time-Consuming 

If you get a notice of an audit, understand that this process won’t be resolved immediately, especially if you are faced with a correspondence audit, which will have you exchanging documents with the auditor for weeks, or even months. Patience is fundamental in this regard.

Organise All Relevant Records 

You and your financial accountant should thoroughly dig up and compile all your financial records from the previous tax year. This includes bank statements, financial ledgers, all receipts and invoices, and many more. The more documents and information you have, the easier the entire audit process becomes. However, if the auditor requests specific documents, ensure you have them available also. The goal of any audit is to ensure that you and the auditor have the same financial information. 

Always Keep Your Financial Accountant Involved 

Dealing with an audit takes a toll on you, and if you don’t want to make a mistake that could jeopardise the entire process, consider keeping your financial accountant involved. The auditor will not overlook any mistake you make during the audit. 

Be Prepared for Questions 

If you are faced with a field audit, then you have to see the auditor in person. If this happens, you have to be fully prepared to answer any question thrown at you. Field audits are usually more thorough. Be straightforward with your answers. Do not answer information irrelevant to the question.

An audit can be considered a learning process. No one would like to go through an audit twice, so always understand what is needed of you always. These tips will help you get through any audit process.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.