Are you at risk of a tax audit, like IMF chief Christine Lagarde?
Just because you're in a position of power doesn't mean you're above the law. Take Christine Lagarde, chief of the International Monetary Fund (IMF) for example. Trusted to run the world's financial system, French prosecutors investigating corruption are deciding whether to charge Lagarde for making a huge state pay out to a disgraced tycoon during her time as French finance minister. But these accounting 'mistakes' often slip under the radar. Here's what could put your business at risk of a SARS audit...
International Monetary Fund chief Christine Lagarde will be grilled by prosecutors today over making a €400 million pay out to disgraced businessman Bernard Tapie while she was France's finance minister, says TheLocal.
This payment led Tapie to clear his huge debts and tax liabilities.
And making a large pay out in running your business could put you under SARS's audit for an audit, too.
There're a number of factors that increase your risk of audit.
Four factors SARS will look for that'll put your business at risk of a tax audit
SARS'll make a comparison between the annual financial statements, Vat returns and tax returns it receives, as well as tax certificates issued and disclosures made on the returns.
Don't forget that SARS can also compare other businesses in your sector to spot any risks that make it more likely your business is guilty of tax evasion.
SARS'll identify these risks by asking specific questions on tax returns and by sending out payroll and transfer pricing questionnaires.
It also looks out for any large changes in ratios that can be measured in the annual financial statements, such as gross and net profit margins, revenue, financing options and connected parties disclosed from year to year.
But there is a way to make sure your accounting records pass SARS' scrutiny.
Here's how to minimise your risk of facing a SARS audit…
You'll need to implement sound accounting controls in place to ensure your employees don't even think of committing tax fraud!
One of the best ways to do so is to communicate and enforce ethical values, and to assign responsibility and authority to employees responsible for your business accounting, says FSPBusiness
That way, your accountant will feel more accountable and less likely to make the type of accounting error – intentional or not – that would put your business in SARS' auditing spotlight.
Note: 5 of 1 vote