The knock on the door from a Tax Inspector is something that every taxpayer fears. Your immediate thoughts will be "Have I been honest with my tax returns or not". So what do you do? First, don't panic. Second, sit down and work out your next steps so you can win any tax investigation.
Here are the main things to do:.
Advice 1 - Get to your Tax Lawyer first
Get in touch with your lawyer first as soon as you receive notice that you are to be audited or investigated. After that see your accountant but be guarded in what you say to him or her if you have not been totally honest in your tax affairs.
Taxation is law pure and simple so your lawyer is good to have around for many tax situations. The investigation may only be small; nevertheless your professional advisers should advise you if your interests are to be protected. Make sure your lawyer knows a bit about tax and tax law.
Advice 2 - Don't handle it on your own without advice
Be aware that in a large tax investigation, that is, not just a small simple one, your tax accountant and possibly your lawyer should be present. Do not conduct an investigation on your own. Prior to this, say or do nothing without obtaining advice. Inquiries from any other party should be directed to your accountant who may bring in your lawyer if there are legal implications.
Advice 3 - Take it real slow
Always take your time. There is no compulsion to inspect quickly, so delay as long as you need to assemble all your thoughts and information. If necessary you can require every question to be in writing and your answers to also be supplied in written form. Keep your head clear on all points. Never, never be rushed or bullied into an answer or into making a statement you did not intend to make.
Advice 4 - Reveal ALL to your lawyer for protection
It is vital that you disclose everything to your legal adviser. Whatever you tell your lawyer is protected and can't be used against you. It is "privileged information" so it stays only with your lawyer and you.
Advice 5 - Your accountant is not always safe
Remember that whatever you reveal to your accountant is not privileged information and can be disclosed if questions are asked about your affairs. It means that in some cases what you say to your accountant may have to be a little guarded if you have not been straight in your affairs. In addition your advisers cannot help you unless they have all the facts so be straight and open with them. They would also require your books, documents and agreements etc.
Advice 6 - Keep cool
Officers of the Tax Department are people like you and me. You should approach any enquires from them in a courteous and professional manner remembering at all times that you also have rights under the law. The powers of tax officers are specified by law and should not be overstepped. On the other hand don't be idiotic. Keep your cool at all times.
Advice 7 - Know your rights
You have many rights so be familiar with them.
Some things to remember include:
You have the right to obtain legal representation on all matters. You may also have a constitutional right to privacy and confidentiality and it is possible that, unless this is taken away, it will remain.
When officers arrive at your office or home, request their identity verification. If they have no letters of authority send them away and see your lawyer. Answer no questions unless your lawyer and accountant are present, and give out no information until you have been advised.
The Commissioner of Taxation has the power to demand books and documents and the power to come in and "seize" any records that you may have. You do not have to indicate where these records are. They do not have the powers of arrest or automatic search warrant powers.
The Commissioner can only require specific information from you and your lawyer can request the reasons why any particular information is required.
The important point is that whatever actions are taken by the commissioner must be relevant to the investigation. If they are not relevant (and they may have to justify this) you have a right not to provide the information.
Advice 8 - Keep out of the courts if possible
If possible, try and keep away from legal confrontation because that could cost you thousands of dollars. Taxation is law and disputes may involve interpretation not only of the tax laws but also statues other than the Tax Act. Some issues can get complex, so what you save in tax can easily all go in legal fees. As with most other situations it often turns out that the only that win in the end are the lawyers and accountants .
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