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Here are the seven steps an auditor will take to review your income tax

by , 06 August 2014
An important part of protecting your rights during a SARS audit is to understand the process. This way if the SARS auditor oversteps the boundaries or doesn't follow procedure, you can complain.

This goes for every type of audit because they all have to follow a particular process.

And when it comes to an auditor reviewing your income tax, he has to follow these seven steps...

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These are the seven steps a SARS auditor must follow when he reviews your income tax

Step #1: The auditor will start with your tax returns. He'll look for:
- Any adjustment you made and allowances you claimed.
- The information you included in your tax return that doesn't reflect in your Statement of Comprehensive income.
- Payments of dividends and royalties to non-residents.
Step #2: He'll check your Statement of Comprehensive Income and any notes you made. He'll check for:
- You can claim the expenses you did.
- Inter-company transfers and changes.
- Unusual items and year-on-year inconsistent items.
- Adjustments for previous years to correct your financial statement.
- Large deposits into your bank account made at the end of the year.
Step #3: He'll analyse your Statement of Financial Position and any extra notes you made.
Step #4: He'll go back into your tax return and scrutinise the General Parts.
He'll check the information here against the information in your financial statement, tax return and calculation of taxable income.
Step #5: The auditor will check your statement of assets and liabilities.
Step #6: He'll go through your computation of your taxable income.
Step #7: He'll check if your company withheld and paid dividend tax if you receive and pay out dividends.
Anytime a SARS auditor does an audit on your income tax, this is what he's going to do. Ensure he follows the correct procedures and doesn't overstep the boundaries.

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