The prospect of an audit may make anyone’s hands sweat, no matter how well prepared they are. Not only is it a disruption that must be managed while continuing to do business as usual, but the expenses of responding to enquiries from the appropriate tax agency can soon mount. Tax audits will become more common in the present Covid climate, with firms benefiting from government refunds, Job keeper, and other support during this difficult period, while the different revenue agencies hunt for methods to bring budgets to balance.
Professional fees, such as those of accountants and attorneys, are covered by tax audit insurance when responding to audit and investigation letters issued by state and federal tax bodies. Tax audit insurance is available as a stand-alone policy or as an add-on feature to Directors & Officers’ Liability (“D&O”) policies for major corporations and Management Liability plans for small enterprises. Tax Audit insurance is typically purchased as an extension of D&O or Management Liability insurance.
Tax Audit Insurance’s Advantages
- What Is the Reason for A Tax Audit?
Tax audits are undoubtedly stressful, but what causes them? What can you do if you don’t want to be audited? This isn’t an entire list, but here are a few popular ones: While it’s true that the ATO will have a lot of your income information at tax time, it’s still your job to make sure you’ve reported all you’ve earned. Inconsistencies and errors – unexpected deductions, excessive deduction expenditures, rapid decreases or wild swings in revenue from year to year in foreign transactions – Money frequently traveling in and out of overseas bank accounts will cause the ATO to pause and take a closer look, especially in today’s world of global business and banking.
- What Is Normally Covered by Tax Audit Insurance?
With the help of a professional, you may boost your chances of successfully completing an audit with minimum effort. A tax agent or accountant would most likely be able to assist you in better locating and presenting your records, allowing you to better make your case throughout the auditing process. In this sense, tax audit insurance might provide you with more protection than dealing with the ATO on your own. The following fees are normally covered* by tax audit insurance: Fees charged by accountants; Fees charged by tax agents and other professional costs that have been indicated.
- Who Is Eligible for Tax Audit Insurance?
In brief, the ATO has the authority to audit any firm. Even if you’ve honestly stated all of your revenue, been prudent with your deductions, and filed on time, a company owner’s chance of getting audited is not excessive. Companies with perfect tax records may be audited in some situations if there are apparent discrepancies between their tax returns and the documents given by government authorities and banking institutions.
