How to Deal with a Tax Investigation and Win
No-one likes a tax investigation, but no matter how careful you are, it is always possible. But just because you are investigated does not mean you are defeated. Remember that the tax office is subject to legal process and the burden of proof to force you to pay any tax or penalties is on them when it comes to court proceedings. Remember that going to court is unlikely, as it is as costly to the tax authorities as it is to you, they will make a business decision on what is worth pursuing, no matter what they claim publicly, and this works to your advantage.
Table of Contents
Get Your Books in Order
Always have your bookkeeping up to date, but especially when you are about to be subject to the scrutiny of a tax investigation. Have your team look at what reserves, assets, and liabilities you currently have. If you are aware of any unpaid tax liabilities, have this information to hand before responding to any communication from a government source.
Find Out What They Know
They are numerous reasons that the tax office may be looking into your affairs, and while it is never a pleasant process, some tax investigations are more damaging than others. You could be as unlucky as being selected for a random audit; some firms are selected without prejudice for this every year. The good news with this type of tax investigation is that they are not coming in looking for anything specific, so it can be a relatively painless affair if everything is in order. If they are looking at you due to alleged wrongdoing, then you should take the matter more seriously but remember they must prove this. You must be compliant in handing over requested documents, but don’t just accept that they are right.
Get a Good Lawyer
As much as preparing your books and knowing what the alleged issue is, you should arm yourself with an expert legal defense. Ensure you hire a lawyer with a proven track record, someone like Ryan J. Gibbs, who has handled more than 7,000 tax appeals is ideal. You can leave all the legal work and planning in their capable hands while getting on with running the business.
Negotiate a Deal
As much as the tax people will send letters with strongly worded rhetoric, often using threatening language, making a vague reference to potential criminal charges and legal proceedings. Don’t despair, these are all common tactics to scare you into submission. Taking the legal route is costly for everyone, and even if they feel they are correct, they will always negotiate a settlement, especially if you offer to pay immediately.
Plan for the Future
Once you have been through this stressful and worrying ordeal, it is essential to take steps to prevent it from happening again. Make sure you have a decent accounting team and everything is accounted for accurately. But also look at your company structure, think about where you are registered, and where you pay your taxes? Registering in an offshore territory could save you thousands off your tax bill.