Preparing for an audit step-by-step<\/h2>\nStep 1 \u2013 Examine your audit notification letter<\/h3>\n
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If you are selected for an audit you will receive written notice 21 days in advance.
\nYou should review in detail your audit notification letter.<\/p>\n
The letter will include details of:<\/p>\n
- \n
- the date and time of the audit<\/li>\n
- the accounting period that will be audited<\/li>\n
- whether the audit will focus on one issue or several issues<\/li>\n<\/ul>\n
If you require clarification regarding any details in the notification you should contact Revenue right away.<\/p>\n
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Step 2 – Meet with your accountant or tax advisor (if you have one)<\/h3>\n
A meeting with your tax advisor will help you understand the audit process and potentially ease some of the anxieties you may have. Your accountant will also be able to advise you on any information you need to gather ahead of the audit.<\/p>\n
You should also discuss with your accountant any issues or concerns you have regarding your taxes.<\/p>\n
For example, do you have expenses that you can’t provide receipts for? Or have you got a source of income that was not declared on your tax return?<\/p>\n
Your accountant can advise you on the best ways to prepare for the audit with these issues in mind.<\/p>\n
Your accountant can also help you conduct a\u00a0dry run of the audit<\/b>. This will ensure that all information required by the auditor is readily available and that no potential problem remains unidentified.<\/p>\n
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Step 3 – Review all relevant documents<\/h3>\n
In order to verify the details included in your tax returns, it’s a good idea to have all relevant supporting documentation on hand during the audit.<\/p>\n
For example, you’ll need all of your sales and purchases invoices and the auditor should be able to match these in your financial accounts.<\/p>\n
Mistakes happen<\/b>. This is why it’s important to review all the relevant documents relating to the tax period outlined in the audit notification to identify any errors or discrepancies.<\/p>\n
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Step 4 – Voluntary Disclosures<\/h3>\n
Honesty is always the best policy! This is especially true when it comes to your tax obligations.<\/p>\n
If you discover\u00a0an error on your tax return<\/b>\u00a0after you have received an audit notification you can submit a\u00a0qualifying disclosure<\/b>\u00a0to Revenue.<\/p>\n
You will have two weeks after receiving your audit notification to inform Revenue that you intend to make a qualifying disclosure. You will then be given a further 60 days to gather everything you need for the qualifying disclosure and to arrange payment of back taxes and whatever interest is due (at rates of up to 10% per annum).<\/p>\n
It’s vital that your qualifying disclosure addresses\u00a0all of the issues<\/b>\u00a0raised in the audit notification as well as any additional issues you have become aware of or liabilities you owe.<\/p>\n
Penalties<\/h4>\n
Making a qualifying disclosure will generally result in a reduction of penalties you may owe at the end of the audit process.<\/p>\n
Penalties start at 100% of the tax liability, but full disclosures can reduce the penalty\u00a0to as little as 3%<\/b>.<\/p>\n
Another good reason for making a disclosure is that in many cases it will keep your name out of the paper as a tax defaulter.<\/p>\n
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<\/p>\nWhat actually happens during an audit?<\/h2>\n
An audit will usually proceed as follows:<\/p>\n
- \n
- The auditor will explain the purpose of the audit and indicate how long the process will take. You will then have an opportunity to make a disclosure if you suspect that you may have a tax liability<\/li>\n
- Your books and records for the tax year in question will then be examined<\/li>\n
- Your auditor will inform you if all is in order with your return. Or, if your return needs to be adjusted, they will discuss this with you and also provide written notification of the required amendments<\/li>\n
- You will then have a final interview with the auditor and you will be asked to agree on a total settlement (if necessary)<\/li>\n
- After you have agreed on the final settlement, you will have an opportunity to pay the auditor who will then give you a receipt<\/li>\n<\/ul>\n
Get Your Irish Tax Refund Now!<\/a><\/p>\n
Why me?<\/h2>\n
Less than one in every 20 audits are selected randomly. If you receive an audit notification letter it usually indicates that Revenue are not satisfied with something on one of your tax returns or they have information that you have not declared some of your income.<\/p>\n
Can I avoid an audit?<\/h3>\n
No! But there are a few things you can do to reduce your chances of being selected.<\/p>\n
Your records<\/h4>\n
Failure to keep proper tax records is a common mistake. Poor accounting systems and bookkeeping practices will inevitably lead to errors and mistakes \u2013 and this can potentially increase the likelihood<\/b>\u00a0that you will be selected for an audit.<\/p>\n
For example self-employed and PAYE taxpayers must keep expense receipts for at least six years. So it’s vital to ensure that these are stored in an organised fashion and in a safe place.<\/p>\n
It is the taxpayer’s responsibility to have an accounting system that is fit for purpose. A good cloud-based accounting system is available for as little as \u20ac20\/\u20ac30 per month. Without proper filing and organisation of your tax documents, you will likely find the audit process to be tricky.<\/p>\n
What’s allowable?<\/h4>\n
When it comes to tax, understanding what is allowable is crucial.<\/p>\n
For example, any expense you claim must be wholly and exclusively for the purpose of your trade.<\/p>\n
And if your business is required to charge VAT, Revenue will examine whether you charged it in the right amount. In other words, you can’t charge 0% or 13.5% VAT when you should have charged 23%!<\/p>\n