The 6 Secrets of Surviving a Tax Audit
Posted on 27 December 2009
Being audited? You need help! The most important help I can give you is to adjust your mental state. Then maybe, just maybe, you can listen to some good advice about not just surviving, but enjoying and possibly flourishing in a tax audit. That’s right, enjoy it as it should be a learning process to help your business with better controls. Better controls means more money for you!!!!!!
Panic? Throw up? Run for the hills? These are typical responses to a letter from the tax man. A letter from the tax man is not your typical letter, but it is definitly memorable to read the words “Tax Audit” followed by a date you have to prepare your books and records for review. Yikes!
Rest your mind and don’t panic, you too can more than survive a tax audit. People do every day. The secret to “flourishing in your tax audit” is to not believe the misconceptions out there. The list below is the most popular misconceptions I have heard from clients.
Misconception #1: The tax man is out to get me!
It is the CRA or IRS’s job to randomly audit businesses on a yearly basis. They choose businesses with a lottery type system and you could be one of the chosen ones. At the end of the day, tax authorities collect information, check for accuracy, makes necessary adjustments and they keep & update statistics. It is not personal and they are not out to get you. You never know, you could get some money back!
Misconception #2: The tax man will not help me.
The fact is, you can call them for free on many of their TOLL FREE numbers. Now why would they make it easy for you to call if they didn’t want to help you? Afraid of phoning, don’t be. You can also just go to their website and search out your question at http://www.cra-arc.gc.ca/menu-e.html or http://www.irs.gov/help/index.html?navmenu=menu3. Their websites are amazing and very helpful.
Misconception #3: The tax man will garnish my account or worse, they will take all my money.
All they are interested in is getting paid just like any other creditor. Of course, they have more power than your average creditor, but they will work with you as long as you WORK WITH THEM. Not working with them can cost you additional interest and penalties. Eventually, you may be garnished for not cooperating.
Misconception #4: I will end up paying more money just by talking to them.
The only way that you could end up paying more tax dollars is if you actually do owe them. It is not the task of the CRA or IRS to automatically assume you owe them more. They have to have a basis for every dollar they say you owe. If you keep neat and tidy records, have back up for your deductions and file on a timely basis, chances are that you do not owe anything in addition to what you have already paid. If you don’t keep good records, you may need to get some help and make your life easier.
Misconception #5: I received another letter from the tax man. It must be really bad now.
If you receive additional mail from the CRA or IRS, please don’t automatically assume that there is anything wrong. Just pretend you received mail from any other company and check their accuracy. The people at the CRA or IRS are human just like anyone else and they too can make errors…………………
Misconception #6: I have already paid my taxes and now they say I owe more. Will this ever end?
If you paid your outstanding amount by the due date, the tax man has most likely made a mistake. Yes, they do make mistakes. The CRA or IRS employees are people, just like you and me. In order to clear things up, you will need to contact them. The people at the CRA and IRS are quite friendly and helpful. Just explain your situation and they will correct any error(s) they have made. This also includes anything that has accumulated additional interest and penalties that you should not be paying. Just be clear and relaxed when you speak. Remember to breathe………….
Stay tuned to this blog. Next time I post, it will be with your top tips to make your audit easy. Thats what I said, “EASY”.
Until next week, ciao and arrivederci,
Vinnie
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