For A taxpayer: What Does Tax Audit Process Involve – Individual or corporate taxpayer gets involve in tax audit if he has tax queries that need to be examined or corroborated with his tax returns.
At this point, the taxpayer begins to ask certain questions such as, What is tax audit? What does the taxman do when he tax audit me? As a taxpayer, what can I do about tax audit process? Are there guidelines for tax audit activities for a taxpayer. The first question, please.
This article is for all taxpayers, and students of taxation. It highlights what tax audit is and what it’s not. It tells you the way our of tax audit mess. It gives you useful tax avoidance information
What is Tax audit?
Tax audit is a special audit on the taxpayer. It’s always carried out by staff members of a tax authority. It’s a verification of tax matters relating to entries in any taxpayers books of records, documents, accounts and tax returns. The scope is always determined by the revenue office from time to time
In my other previous article I discussed the issue of tax query, and why taxpayers get tax audit challenges, I made efforts to let you understand that tax query if not well handled could lead to tax audit. What then is tax audit? In the second post, I listed factors that always trigger tax audit. In this post, I want you to know what tax audit involves.
For A taxpayer: What Does Tax Audit Process Involve
Tax Audit is normal in self-assessment tax regime:
Tax audit is an integral part of the tax self assessment scheme/regime which empowers the tax authority to always come around a taxpayer at least once in two years to check for accuracy, completeness, adequacy of the tax computations and payments.
Before the self assessment regime, the tax authority imposes tax on tax payers following certain procedures. But the self assessment regime is one that allows the tax payer to assess himself and pay accordingly. So as a follow-up check on the tax payer, the tax authority sends out its staff periodically to check if the returns and payments made by the tax payer is true, accurate, sufficient, and complete, and if the calculations and the documentations resulting to such tax figures are accordingly correct.
From the above narration, you understand that tax audit is a normal thing in the tax processes of a country.
Why Immediate or Sudden Tax Audit?
This is where the tax authority follows you up immediately you make your tax returns. There must be reasons for this, and what are these reasons. This is the type that looks abnormal and which I always advise every taxpayer to avoid. Of a truth, if this does not happen, your company may not be tax audited in several years. This is because, the selection for those to be tax audited does not follow a systematic manner.
What then does tax Audit involve?
1. It involves a desk audit in the tax office. Once you submitted your tax returns the tax inspector examines it and its content and do certain analysis that are necessary to determine a tax issue (query) that needs further clarification. If he finds any material facts, he communicates you.
2. Notification letter: – This letter will be addressed to you directly, if you don’t have a tax consultant, otherwise it’s always routed through the tax consultant. This letter give details such as:
- The dates (days) of the tax audit
- The tax personnel involved
- List of documents they would want to verify
- Assets they would like to see
- Company personnel they would like to see in connection to the tax issues,
- Other matters.
For A taxpayer: What Does Tax Audit Process Involve
3. Pre-audit meeting:
This meeting is entirely a formal meeting. It has to be fully documented. It states time, date, those present, and agenda. Issues agreed upon are so noted and others can be verified.
4. Real Field Exercise:
Here every document requested must be submitted and documented as received. The audit team then sets off with their activities. Every audit methods necessary are employed.
5. Post Audit Meeting:
At this time, a concluding meeting will be held with every official setting as noted above. But now, every finding will be highlighted and agreed upon. Yet this is not the end of the audit. The next steps happened in their office.
6. The Audit Report:
This reports are both interim and final. It’s a report that is always directed to the tax authority management team who will take decisions on the finding of the audit team. Because the tax authority does not require anybody’s head in tax matters, the next step must take place
7. Reconciliation Meeting:
Here again, the tax payer is given opportunity to settle these matters without involving tax tribunal or court action for criminal implications.
Can you see how much tax audit will cost you?
It’s actually costly if you consider time, efforts and money that is involved in these processes and stages of the processes. It could cost you your reputation. The best option is not to get involved in tax audit in this manner. Normal and routine tax audit is simple. It’s like a normal tax payment appraisal.
For A taxpayer: What Does Tax Audit Process Involve
What then is the Solution? This will be our next discussion.
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For A taxpayer: What Does Tax Audit Process Involve
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