Prevent the problems occurring right from the start and avoid the costs associated with having to fix them when Revenue come knocking on your door! There’s been a few articles written lately about how to handle the problems a revenue audit can present which is all well and good however the thing that most articles miss is the importance of preparing accurate accounts and income tax returns in the first place. If everything is in order you can sleep soundly at night without having to worry about having that revenue audit. It might sound a bit obvious but there are a number of reasons why inaccurate or incomplete returns are submitted to Revenue which in some cases can lead to large tax liabilities. Here are the 7 top reasons why this happens:
- Poor accounting systems and bookkeeping practices will lead to errors and mistakes. It is the responsibly of the tax payer to have an accounting system that is fit for purpose, and ignorance is no defence when it comes to tax law. The day of the manual books or bag of receipts should be long gone. A good cloud accounting system like Xero costs as little as €20 / €30 per month.
- Mis-understanding what is allowable and not allowable. Expenses must be wholly exclusively and necessarily for the purpose of the trade. No the holiday in Spain is not allowable, or the new kitchen, or the cost of the night out with your friends! Or charging VAT at 0% or 13.5% when it should be at 23%, no you won’t get away with that.
- Tax payers really doesn’t understand the long term importance of accurate, timely and complete figures, and the consequences of failure in this regard. Time should be given to understanding the costs associated with bad practices.
- Trying to be too ‘clever’ in hiding income, bank accounts or bumping up expenses. So how can you have a lavish lifestyle on the minimum wage ? Some Accountants are afraid to challenge the tax payer for fear of losing the client.
- Accountant not giving due care to the preparation of the accounts and returns, not using completion checklists and not reconciling figures to third party documentation, in other words taking shortcuts to keep costs down.
- Ignoring good advice from Accountants. In spite of paying for and receiving some really good advice there are tax payers who simply prefer to take a chance.
- The classic excuse being ‘I don’t have time’ to get my books in order can result in some Accountants submitting half-baked returns to Revenue. This is completely unnecessary, if you don’t have the time then just agree a monthly fee with a suitable Accountant or Bookkeeper to look after your affairs, it won’t cost a fortune.
In summary, have an up to date fit for purpose accounting system and a good professional Accountant who knows what he’s doing will serve you well in the long term. You would be wise to spend some time preventing a possible problem rather than trying to fix the problem at revenue audit stage where it will be far more expensive exercise. If you want to be properly prepared for that day contact Pat Sutton, O’KellySutton firstname.lastname@example.org