Right of Taxpayers During an Audit

If you are running a business, filing accurate taxes becomes essential. There is a need to keep a record of everything and file the taxes correctly. Financial records should be maintained properly to avoid triggering audits.

Audits are usually conducted to see if your records are in place or not. Most of the time, there is no need for audit representation, and just providing the information asked by the authorities should do the work.

However, sometimes discrepancies in financial records can lead to several problems for the taxpayer. They even get charged with penalties, and legal action might be taken against them (in a worst-case scenario).

Furthermore, each region has its laws and regulations. Canada also has tax laws specific to the place. During an audit, taxpayers get the right to seek audit representation.

They can hire a professional to help them navigate the complex landscape of audits. If you are looking for such services, you can get in touch with Padgett Business Services to hire a professional for your business.

What are the obligations of taxpayers during an audit?

There are various things that taxpayers should give importance to during an audit; some of those obligations are listed below:

Taxpayers are supposed to provide information with complete honesty and without hiding anything. The information should be provided on time as well.
Records should be precisely maintained as per the tax laws by the taxpayers.
Tax laws should be followed appropriately, and timely submissions should be made.
They need to stick to the responsibilities related to taxes, and they can also reach out to the department for any help.

What are the provisions that auditors need to stick to?

There are various provisions that auditors are supposed to adhere to; they are mentioned below:

If there are any opportunities for a refund, they are supposed to inform the taxpayer about it.
Taxpayers can offset the liability by the use of sales tax that was paid yearly. The auditor determined the liability.
When the audit results come out and if there is overpayment from the taxpayer’s side, they can appeal for their rights.

What are the records that the auditor might examine?

There are many records that the auditor is likely to go through; some of these records are listed below:

Tax returns of the taxpayer.
Financial statements.
Data used for preparing tax returns.
Invoices related to purchase (it can be for supplies).
Books and records are also examined.
Subsidiary ledgers might also be examined.
Electronic records are subjected to examination, too.

The audit depends upon how big or small your business is; in the same way, records will be examined differently, too.

What are the rights of taxpayers?

Taxpayers have many rights, some of which are listed below:

They can request a convenient location and time for the audit to be conducted.
They have a right to representation.
Taxpayers can be accompanied by someone, too.
If they cannot be there, they can have some third party to be there in their place.
Taxpayers are also entitled to get copies of audit schedules.
To learn about the findings, they can meet with the auditor.

What are the types of audits?

If there is a discrepancy found in the records, then one of the two types of audits can be performed:

Detailed audit
Sample audit

Detailed audit:

Here, the auditor might take all your business records into account for detailed examination. Therefore, keep everything ready beforehand.

Sample audit:

The auditor is likely to use a sampling method of this type. Sampling helps in getting accurate information and also saves a lot of time.

Contact a professional and get the right to representation!

Representation during an audit becomes crucial to tackle any problems that may arise during the process. It is a time-consuming process, and therefore, you need someone to guide you throughout the process.