Part of being in business is the uncertainty when an audit will be conducted or what tax type will be selected for audit. All we know is that at some stage anyone may be selected for an audit.
Being selected for an IRD audit is generally an inconvenient and a stressful time for you. While there is no rule of thumb, some of the any number of reasons the IRD may select your business for an audit include:
- Late filing of returns.
- Not declaring all your income.
- Claiming expenses that are not deductible (for example, entertainment), or expenses that are out of the norm for your industry.
- Appearing to live beyond your means.
- Working in an industry, such as hospitality, that has a high level of cash sales.
If you find yourself in the position of being notified of an IRD audit, our first advice to you is to talk to your accountant. It is important to ensure someone experienced in communicating with the IRD in this specialised area helps you prepare and provide the extensive information the IRD will request.
The cost of a tax audit is usually associated with the preparation of information for, and the time involved in dealing with, the Inland Revenue Department. In our experience a small business can often pay in excess of $2,000 for their accountants involvement in a quick, routine audit where very few, if any, issues are found.
If you're faced with an IRD audit, ask for help! Don't go it alone, the law is complex.
This advice is general in nature. Every situation is unique. Strettons has the expertise to guide any taxpayer through the audit process.