Whoever keeps what also has something

Fortunately, it doesn't happen that often, but it may just be your turn: a tax audit. In any case, the inspector will set aside a few days to thoroughly browse through your books and other administration.

For you, as a taxpayer, it is certainly annoying when you hear that the tax inspector comes to visit for an inspection. Not necessarily because they will find something, but because it takes a lot of time and the uncertainty is annoying in advance.

The choice is yours
After the announcement, an appointment is made for the day (or days) on which the inspection will take place. An audit will take place at your company or at your accountant's office. The choice is yours, but my advice is to let your accountant or advisor assist you. Especially during the first conversation.

The officials of the tax authorities are very well trained in conducting a conversation. You will soon have the feeling that the best man or woman is the right one and that it will all be okay. And before you know it, you'll be sitting in your talking chair. However, it is often not easy at all. Everything you have said will be noted and if things go wrong, it will be used against you.

Not rosy
Of course you should answer the questions asked and provide information, but this does not mean that you should tell everything (too) rosy. For example, I recently had a file in progress where the entrepreneurs had a nice cup of coffee when they met the officials. During the second cup, it was extensively discussed that it was hard work. Many hours a week had to be worked and of course there were sometimes setbacks. However, they had come up with a good solution for that. 

When the tax officials presented their report afterwards, a significant profit adjustment was made. After all, working so many hours x so many euros per hour must lead to a profit that is higher than that stated. According to the officials, there was concealed turnover. And if that was the case in the audited year, then it must also have been the case in previous years. So also in those years the profit was adjusted.

It then becomes very difficult for an advisor to talk down the profit correction afterwards. More value is then assigned to the word of the 'honest and open' entrepreneur than to the word of the advisor. After all, in the eyes of the tax officials, its objective is solely to reduce the profit adjustment.

Tidy up is neat
There was another problem in this file. Under the motto 'tidy up and tidy', the entrepreneurs had thrown away everything. All the quotations, the time sheets, the notes, the information about purchases attributable to the assignment were no longer there. So also not with regard to the extra material that was used to carry out work. There were only the bills sent. Proving that there is no black turnover then becomes difficult (not to say impossible).

In the end I was able to reach a compromise with the tax inspector in this file. As a result, additional tax was still owed, but less than the original correction showed.  

Let us help you
All in all, an expensive lesson for these entrepreneurs. Don't let this happen to you. Always be assisted by an advisor when an audit is announced. The hours that your advisor charges for this often turn out not to be a cost, but an investment. In addition, make sure that you have as complete a file as possible for each assignment. This may be a digital or paper file, but it is better to keep too much than too little.

The tax authorities will fill in the information that is missing at its own discretion and that is not to your advantage. Did you grow up with the proverb 'whoever keeps what has what'? That proverb also applies to an audit of the tax authorities!

Eric Marcus

Erik Marcus is the owner of Remie Fiscaal Juridisch Adviesbureau, a consultancy for agricultural entrepreneurs. He likes to come up with innovative and groundbreaking solutions, especially if there is a tax advantage that can be achieved.

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