In New Zealand, the Inland Revenue Department (IRD) conducts regular audits to ensure that businesses comply with tax laws. These occasions are often stressful ones for businesses. After all, no matter how many times you’ve done it, facing a tax audit is not exactly something to look forward to.
Generally speaking, however, these audits are really only an issue if your records are disorganised or incomplete. Getting a good accounting firm onboard in the time leading up to the audit should reduce problematic gaps in your records and pave the way for efficient, stress-free audits as well as valuable peace of mind.
With the expertise of accountants Dunedin businesses trust, you can keep both audit preparations and the rest of your business running smoothly. Here are some of the things your accountant will do to ensure an uneventful tax audit season for you:
1) Review and Organise Financial Records
One of the first steps an accountant will take for a client business is to review and organise the latter’s financial records. This includes ensuring that invoices, receipts, bank statements, and other financial documents are up-to-date, accurate, and easy to retrieve. A well-maintained set of records is a must for your business, as the IRD will want to review all the financial documents you have on hand.
2) Perform a Pre-Audit Review
An accountant can also conduct a pre-audit review of all of your business’s financial statements and tax filings to spot any red flags that the IRD might raise during the actual audit. This should give you and your team time to fix any issues before the audit proper.
3) Ensure Compliance with Tax Laws
Depending on the results of the review, your accountant may make recommendations on what your business should do to ensure full compliance with current laws as well as tax laws that will be in force after the audit period. If total compliance is not possible because of some gap in your records, an experienced accountant should still be able to help you reduce the risk of penalties during your audit.
Should you and your staff be new to all these, your accountant can also help you understand the legal requirements. They could prepare materials to help you get up to speed with GST reporting, PAYE, and other tax concepts, ensuring that your business stays on the right side of the law.
4) Guide You in Proper Documentation
During a tax audit, the IRD will request a list of documents to verify your financial records. Your accountant can help you gather all the necessary paperwork, including tax returns, expense reports, payroll records, GST filings, and whatever else matters for the upcoming audit. They can also vet and organise the documents to help expedite the upcoming audit process.
5) Clarify Tax Positions and Deductions
If your business has claimed certain tax deductions or taken specific tax positions, an accountant can explain these decisions, both to your staff and to the IRD. They can also provide any documentation needed to support the deductions or positions taken, which can better convey your rationale to tax authorities and perhaps reduce the risk of disputes.
6) Represent You During the Audit
Your accountant can act as a liaison between your business and the IRD, representing its interests. This is a particularly valuable service to take advantage of, since it allows you to focus on running your business’s day-to-day operations unhindered.
7) Identify Potential Tax Liabilities
If the audit reveals any discrepancies or areas of concern, your accountant can help you assess the potential tax liabilities as well as the best way to mitigate any potential risks. They should be able to guide you through multiple potential solutions, including negotiations.
8) Assist with Audit Interviews
The IRD may request interviews with key personnel in your business to better understand how it manages its finances. Hiring an accountant ahead of time can prepare you and your staff for these interviews and ensure that everyone is equipped to answer questions clearly and accurately.
9) Help with Negotiations and Settlements
In some cases, a tax audit may uncover small discrepancies—in which case, negotiations or settlements with the IRD may be necessary. An accountant can provide valuable guidance throughout these discussions so that you can get the best possible outcome and avoid a worsening of your situation.
10) Offer Post-Audit Support
After the audit is complete, your accountant’s job isn’t quite over. Even after the smoothest audits, the IRD may still make recommendations for your business to consider moving forward. They may suggest revising your bookkeeping processes or updating your financial systems, or perhaps they may tip you off to upcoming changes in NZ tax laws. Taking post-audit support seriously guarantees that your business is better prepared for future audits, not just by the IRD but by other parties like stakeholders and investors.
Better Accounting Keeps Your Business’s Finances Visible and Compliant
Tax audits can be quite stressful, even in the best of times—and even accountants themselves will probably want to defer to someone with specific experience in navigating the Inland Revenue Department’s many quirks. Offloading this responsibility will also keep your hands free to work on the day-to-day running of your business throughout the audit period. With the right people by your side, you can keep your business properly compliant with NZ tax laws without missing a beat elsewhere in its operations.
Also Read: Payroll Audit Checklist 2024
