to an Inland Revenue Department auditor arriving at your premises you will
receive a letter advising of the pending audit as well as a telephone call to
arrange a time for an interview. If
you are represented by a tax agent the letter normally is sent to the agent.
the auditor is allowed access to all business documents except those which are
subject to legal privilege. Find
our what the auditor wants- the
advantage of being proactive in this way is that when the auditor arrives
everything required can be provided
with ease, and this implies that you are organised in your business dealings,
and hence you are less likely to make mistakes, both in business, and more
important from the IRDís viewpoint, in tax matters
the auditor will start with the last statutory returns filed, for example with
the latest Income Tax, GST and FBT Returns.
a taxpayer is obstructive (not willing to provide documents, not honouring
meetings that are pre-arranged and so forth) the auditor is likely to assume
(correctly or incorrectly) that the taxpayer is hiding something.
Additionally, under the new penalties regime, any penalty imposed by the
IRD may be increased by 25% for obstruction.
many cases, an imminent tax investigation can be a good opportunity to get your
tax affairs in order and set up proper filing systems- the systems your business
should always have had.
the completion of an audit the auditor is required to write a report (known as
the audit report). Part of
this audit report is to assess the future risk that your business represents in
paying taxes to the IRD. As a
general rule it would appear that the fewer discrepancies that the auditor
finds, the lower the perceived tax risk and hence the less chance that your
business will be audited again in the future.
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