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Four ways SARS target YOUR company for a tax audit

by , 30 October 2013
SARS is always on the lookout for non-compliant behavior. For example, it'll identify risks by asking specific questions on tax returns and by sending out payroll and transfer pricing questionnaires. These are just some of the means SARS uses to target you for a tax audit. Here are four more ways SARS can target your business.

It's crucial that you get your company's tax affairs in order.

If you don't, SARS will use one of these ways to target you for a tax audit.

Four methods SARS uses to target you for a tax audit

#1: Audit selection method: Random selection
How it works:
Cases are selected for audit on a random basis; this is luck of the draw.
What's your risk of being targeted? There's no way to minimise your exposure to the risk of a randomly selected audit because there are no factors to mitigate or control. If you're registered as a taxpayer, you stand a chance of being selected as the subject of a random audit.

#2: Audit selection method: Specific referrals by other sections
How it works:
Other administrative sections within SARS will recommend you for audit.
What's your risk of being targeted? If you have dealings with other sections within SARS and bring yourself to their attention, then they may assess you as a candidate for audit and alert the audit section to your case.

#3: Audit selection method: Specific referrals by the general public
How it works:
A member of the public may use the fraud hotline anonymously and alert SARS to suspected irregularities in your tax affairs, or may make a direct complaint in person.
What's your risk of being targeted? According to Natalie Cousens, Product Manager for How to survive a SARS tax audit, this method is the wild card of the selection methods and there's no objective way to quantify your risk.

Cousens adds that you need to be aware that disgruntled employees, former lovers or spouses and whistleblowers may make your life difficult by bringing you under the audit spotlight.

#4: Audit selection method: Discretionary selection
How it works:
SARS can make a policy decision to target specific industry sectors for audit, particularly problematic sectors that have received media attention or are perceived to be in need of clean up or policing.
What's your risk of being targeted? If you fall within one of these targeted sectors your risk of audit will be high. Recently SARS targeted the bulk trading sector for Vat audits.

The bottom line: While no business is immune to a SARS tax audit, you can avoid increasing your company's risk by doing these things.



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