Full disclosure by an individual in a tax return will reduce the risk of being audited. There is, however, no guarantee that complete disclosure would prevent SARS from auditing you. SARS has different methods of identifying cases for audit. Here are 5 reasons why SARS may decide to audit your business.
1. Random Checks Conducted By SARS
Sometimes, there’s no other reason SARS is conducting an audit for your business other than you’re just the lucky business that got randomly selected. It’s not personal. If this is how you’ve been selected, it shouldn’t be too stressful for you. Ensure that your information is updated per the latest SARS news and regulations and perhaps consult a trustworthy and registered accounting firm to manage your finances.
2. Cynical Verification By SARS
This means SARS doesn’t trust the information you submitted in your tax return. If you or your accountant are using accounting software, check that your business information is correctly updated. It takes one misplaced figure to drastically change your results.
Another oversight to be aware of is failing to update or verify your accounting software when legislation changes – which can land a small business in hot water.
3. SARS Has Identified Your Business As A Potential Risk
In this Digital Age, it’s common practice for many big companies to use computerized systems to detect possible issues. SARS uses such software to identify abnormalities too. The software takes the information provided, feeds it through an algorithm, and gives results considered as potential risks – this happens when information submitted to SARS is incomplete or inaccurate.
You can avoid this easily by double-checking that your information is correct before you submit it. It helps to have a registered accountant look through your records before submission.
4. SARS Has Identified Your Business Sector As High Risk
When some of the other companies in your business sector have been found guilty of similar offenses, SARS can become suspicious. Now, SARS wants to check that every company in that sector is compliant. It could be that some of the businesses are using software that is non-compliant with SARS regulations, or they are using a non-registered accountant.
5. Unexplained Extravagant Lifestyle
If you’ve declared an income of R15 000, but live in a mansion with a monthly bond of R20 000 and drive a sports car, SARS wants to know how you can afford it. The numbers do not add up, which will raise suspicion with SARS. They may expect an explanation for your wealth, which can sometimes lead to an audit.
If you need help finding the right accountant for your business, schedule an appointment with the Acumen Group. We will make tax jargon easy to understand and help to take the stress out of filing your taxes.
