A sales tax audit is defined as the examination of a company’s financial documents by a government\’s tax agency to verify if the proper amount of sales tax has been remitted to the proper authority.
The government assigns a frequency on sales tax filing in monthly, quarterly and annually and sets a due date for strict compliance. Sales tax compliance should be properly observed to not get in bigger trouble and costly penalties when it comes to Sales tax Audit.
Audits are inevitable but shouldn\’t stress you out. Here\’s the 4 Simple Ways on how to handle the audit when you are given out a schedule for a visit:
1. Keep all the records updated.
Bear in mind that you can be tapped for an audit at anytime so it is advisable to keep good records not only for the current year but up to the past 3 years. Also, try to recreate records to simply check again those entries for discrepancies and incorrect postings that may cause red flags.
2. Understand Audit Objectives.
Make a research and take time to understand the audit objectives and what the audit process is likely to entail. Ask around to people or your industry who have gone through the process to gather information and learn from their mistakes to avoid the stresses they endured. Do your homework to know what to expect and know how much the auditor will examine.
3. Make Good Impression.
Be professional and polite. Remember to show up with a smile to set a good vibes for the entire audit duration. Be organized as you show to easily pull-out any documents required for checking. Easy access of records shows you are not hiding anything, making them feel that there wasn\’t any reason to dig deeper. But remember not to overshare and do not give out details or records not being asked.
4. Get Defense and Support from Expert/ Professionals.
In most cases, small or medium sized business owners and even larger corporates who face the audit themselves can unwittingly reveal unnecessary information that might cause bigger problems. That is why retaining a professional service who will represent your business was definitely a wiser decision.
Having a professional to represent you during sales tax audit offers the following benefits:
- They will conduct a pre-audit review of your systems and processes to identify any gaps or risk factors.
- They will control what information gets shared with the auditor. “Let me get with my client and get back to you on that” is a perfectly acceptable answer.
- They will advise you as to where to push back and where to compromise.
- They will help determine the best audit approach – whether it’s a block or sampling approach.
It is said that having key people to represent your business during audit makes the whole process easy and brief. However, choosing to face the audit yourself is also good; in a way that you can proudly show that you truly breathe and live the business that you\’re into. You know the ins and outs and closely monitoring the business flow which also gives out a strong impression.
Anyhow, the best defense to surviving a Sales Tax Audit is to have proper preparation of files, office and staff.