Tax Investigation - What You Need To Do

The knock on the door from a Tax Inspector is something that every taxpayer fears. Your immediate thoughts will be "Have I been honest with my tax returns or not". So what do you do? First, don't panic. Second, sit down and work out your next steps so you can win any tax investigation.

Here are the main things to do:.

  • Advice 1 - Get to your Tax Lawyer first
    Get in touch with your lawyer first as soon as you receive notice that you are to be audited or investigated. After that see your accountant but be guarded in what you say to him or her if you have not been totally honest in your tax affairs.

    Taxation is law pure and simple so your lawyer is good to have around for many tax situations. The investigation may only be small; nevertheless your professional advisers should advise you if your interests are to be protected. Make sure your lawyer knows a bit about tax and tax law.

  • Advice 2 - Don't handle it on your own without advice
    Be aware that in a large tax investigation, that is, not just a small simple one, your tax accountant and possibly your lawyer should be present. Do not conduct an investigation on your own. Prior to this, say or do nothing without obtaining advice. Inquiries from any other party should be directed to your accountant who may bring in your lawyer if there are legal implications.
  • Advice 3 - Take it real slow
    Always take your time. There is no compulsion to inspect quickly, so delay as long as you need to assemble all your thoughts and information. If necessary you can require every question to be in writing and your answers to also be supplied in written form. Keep your head clear on all points. Never, never be rushed or bullied into an answer or into making a statement you did not intend to make.
  • Advice 4 - Reveal ALL to your lawyer for protection
    It is vital that you disclose everything to your legal adviser. Whatever you tell your lawyer is protected and can't be used against you. It is "privileged information" so it stays only with your lawyer and you.
  • Advice 5 ? Your accountant is not always safe
    Remember that whatever you reveal to your accountant is not privileged information and can be disclosed if questions are asked about your affairs. It means that in some cases what you say to your accountant may have to be a little guarded if you have not been straight in your affairs. In addition your advisers cannot help you unless they have all the facts so be straight and open with them. They would also require your books, documents and agreements etc.
  • Advice 6 - Keep cool
    Officers of the Tax Department are people like you and me. You should approach any enquires from them in a courteous and professional manner remembering at all times that you also have rights under the law. The powers of tax officers are specified by law and should not be overstepped. On the other hand don't be idiotic. Keep your cool at all times.
  • Advice 7 ? Know your rights
    You have many rights so be familiar with them.

    Some things to remember include:

  • You have the right to obtain legal representation on all matters. You may also have a constitutional right to privacy and confidentiality and it is possible that, unless this is taken away, it will remain.

  • When officers arrive at your office or home, request their identity verification. If they have no letters of authority send them away and see your lawyer. Answer no questions unless your lawyer and accountant are present, and give out no information until you have been advised.
  • The Commissioner of Taxation has the power to demand books and documents and the power to come in and "seize" any records that you may have. You do not have to indicate where these records are. They do not have the powers of arrest or automatic search warrant powers.
  • The Commissioner can only require specific information from you and your lawyer can request the reasons why any particular information is required.
  • The important point is that whatever actions are taken by the commissioner must be relevant to the investigation. If they are not relevant (and they may have to justify this) you have a right not to provide the information.
  • Advice 8 ? Keep out of the courts if possible
    If possible, try and keep away from legal confrontation because that could cost you thousands of dollars. Taxation is law and disputes may involve interpretation not only of the tax laws but also statues other than the Tax Act. Some issues can get complex, so what you save in tax can easily all go in legal fees. As with most other situations it often turns out that the only that win in the end are the lawyers and accountants .


Copyright 2005 StartRunGrow
http://www.startrungrow.com

StartRunGrow (http://www.startrungrow.com) is a global online information organization that specializes in creating, developing and marketing business help information specifically with the aim of "making business easier" for entrepreneurs around the world. The StartRunGrow objective is to become a dominant player in the business help arena providing end to end solutions for the millions of small and medium businesses worldwide who continue to struggle daily with the difficulties of starting, running and growing a successful business.

In The News:


pen paper and inkwell


cat break through


The Seven Deadly Tax Sins: Commonly Missed Deductions

It's that time again, the April 15 tax deadline is... Read More

Early Distributions From Retirement Plans

An early distribution from an Individual Retirement Arrangement (IRA) or... Read More

Slash Tax when Buying a Business

When buying a business, how the "purchase price" is made... Read More

Business Tax Deductions

As we enter mid-March, taxpayers begin to become very interested... Read More

Home Based Business Tax Deductions

Running a home based business reaps many wonderful tax deductions... Read More

How to Maximize Your Home Business Tax Deductions for 2005

Someone once said, 'the best way to calculate your taxes... Read More

10 Thoughts on Tax Offer in Compromise

Beware of advertisements that claim to settle tax debts for... Read More

Home Business Tax Tips

If you have recently started an Internet or home business,... Read More

Tax Deductions - Mr. C.P.A. Can I Deduct a Pizza? You Too Can Deduct Your Fun By Using Tax Tips

Recently, I stumbled across a concept that could change your... Read More

Organizing Your Taxes

Does this scene sound familiar? It's April 7. You haven't... Read More

Furnishing Evidence in E-Tax Compliance

Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This... Read More

Seven Key Tax Deductions for the Self Employed

As a sole proprietor, it's wise to familiarize yourself with... Read More

How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

How Home-Based Businesses Can Avoid Giving Uncle Sam... Read More

History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those... Read More

Marriage or Divorce ? Check Your Social Security Number

Newlyweds and the recently divorced should make sure that names... Read More

E-commerce Taxation

The means and types of businesses have transformed with advent... Read More

How To Get An Instant Pay Raise

As a gentleman was leaving my class recently, he wanted... Read More

Requirements To Produce Tax Information (Whats Up With That?)

"What we've got here is a failure to communicate." ... Read More

Correspondence From The IRS ? Yikes!

It's a moment every person dreads. You pick up the... Read More

Six Urban Myths About Taxation

Six Urban Myths ? Taxation"I am proud to be paying... Read More

Small Business Tax Issues for Self-Employed Individuals

The United States is a nation of entrepreneurs. There are... Read More

Estate Taxes - It Pays to Plan Ahead

Estate taxes. It's not enough to simply know they exist,... Read More

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain... Read More

Car Donation: An Easy Way to Support Your Favorite Charity and Get a Tax Deduction

Most people look forward to getting their tax return, but... Read More

Uncle Sam is Ready...Are You? Organizing Tips for Tax Time

Anyone who is closely related to an accountant knows that... Read More

How To Set Up A Tax-Saving Bookkeeping System

One of the most important, but least understood or appreciated... Read More

Small Business Tax Deductions for Year End 2004

As a small business owner, it's wise to familiarize yourself... Read More

Tax Tips for Home-Based Business Owners

As tax time approaches, many home-based business owners begin completing... Read More

Tips and Simple Guidelines on How to Calculate Payroll Taxes

Managing a business small, medium or big requires you to... Read More

Surprising Truths About Tax Preparers

Choosing the right tax preparer for your business is a... Read More

Send Your Kids To Summer Camp and Write It Off

If you paid someone to care for a child so... Read More

Hurricane Katrina ? How To Use Your Business Loss To Get A Refund on 2004 Taxes

With the massive losses caused by Katrina, the economy of... Read More

Tax Help Secret: Avoiding the Entreprenuers Curse

Your days as an entrepreneur and businessperson are consumed with... Read More