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Receiving a letter from the tax authority requesting a closer examination of the books is not something any business owner anticipates with enthusiasm. However, if you have been sent an audit letter, which is an official appeal from the tax authority to inspect your records and verify your tax payments, don’t fret. Instead, get ready. Follow these four steps to navigate the process with less anxiety and achieve the most favorable result.

Respond as soon as possible

If you are consistent in filing your taxes and making timely payments, it is likely that the tax office may reach out to you for a random check. In such instances, you may be required to provide receipts and answer a few questions. It is advisable to promptly provide the requested information to the tax office to help close the file quickly.

However, if an on-site audit is necessary, it cannot be avoided. You can confirm the audit date and request any information the auditor may need to assist you in preparing. The best approach to getting through an audit is to respond promptly and cooperatively at every stage. Reacting defensively or unprofessionally may result in further investigations.

Get professional help

Once an audit has been scheduled, it’s crucial to contact your accountant promptly for guidance and assistance. If you’ve been managing your finances independently, it’s advisable to consider engaging a tax accountant at this point. They can help you understand the audit process, organize your financial records, and offer specialized advice to prepare you for the audit.

In case you have concerns that your case is beyond the accountant’s expertise, such as underreported income, understated tax liabilities, or unverified expenses for the tax year in question, you may need to hire a tax lawyer. Many tax lawyers provide a complimentary consultation and can guarantee your rights are protected and explain your responsibilities, bringing you peace of mind.

Organize yourself

During an audit, you may be asked to provide receipts as evidence for any write-offs you have claimed. It’s important to have your paperwork organized and be ready to answer any questions. This will demonstrate that you have accurately reported your taxes. If everything is in order and there are no red flags, the auditor is likely to conclude the audit once the basic requirements are met.

However, it’s important to only provide the information that the auditor has requested. Offering additional explanations or proof may lead to more questions and complications. It’s best to stick to the specifics.

Pay the taxes at once

Assuming you have maintained accurate records and diligently fulfilled your tax obligations, an audit should not yield any unpleasant revelations. However, in the event that the auditor discovers unpaid taxes, it is advisable to promptly settle the outstanding amount unless you can present a valid basis to contest the auditor’s conclusion.

This will prevent the accumulation of further penalties, fees, interest, and payments, and most importantly, enable you to move on from the audit and concentrate 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’ll end up paying in legal fees.