There are few things more terrifying than facing the prospect of having your tax returns audited. Even if you are pretty sure that you have done all you can to record your business's income and outgoings accurately, there will always be a lingering fear that you forgot to include something which could lead to a hefty tax bill. Thankfully, there are some steps you can take which will help to reduce the chance that the tax man will come knocking at your door. Read on to find out more.
Make sure your tax return it correctly filled out and filed on time
Another massive red flag is if your tax return contains lots of errors. A large number of errors in a tax return can make it difficult for a tax inspector to understand your current financial situation. Without a good understanding of your financial situation, it is impossible to calculate the correct amount of tax you owe. Errors also suggest that you either haven't taken the time to fill out your tax forms properly or that you are incompetent - either way, it is likely that the taxman will want to take a look.
If you fail to file your taxes by the end of each financial year, this will also make your tax file standout from the crowd. After all, the smaller volumes of tax returns which arrive late is likely to face much more scrutiny than a return which arrives with millions of others.
Make sure that your life and your income match
One red flag for every tax investigator is if it appears that there is some discrepancy between the way you live your life and the amount of money you claim to be earning. For example, you may have filed several returns which show that you have not been making very much income, and as a result, you do not need to pay a large amount of tax. But you may also frequently drive your sports car from work to an exclusive golf club, and it is this which might prompt the tax man to take a closer look at your returns. Of course, if you have private wealth or a partner who earns a lot of money, you could, in theory, be making very little while still being able to enjoy a luxury lifestyle. However, you should be prepared to explain this to a tax investigator.
A commercial accountant can help you to fill out your tax return and will also make sure it is filed on time. To find out more, call an accounting service.