Did you know that tax auditing can be very beneficial for a company? It is common that many managers have difficulties in seeing this concept as a cost generator. However, it avoids a number of problems due to tax errors and ensures correct compliance with obligations. Given the importance of the subject, we have gathered in this text information that better explains what tax auditing is, how it works and what its importance for the company is.
What is tax auditing?
There is no denying that the tax legislation is complex. It comprises three levels of government: Federal, State and Municipal – responsible for collecting taxes. Any fiscal or tax divergence can generate serious violations to the company. For this reason, tax auditing is relevant. However, if you are an Independent contractor taxes, you must know the topic in details. But what is? Many managers don’t even like to hear that term, but there is no reason to panic. Tax auditing is nothing more than an activity to inspect and control the tax situation of an enterprise. The auditor, the professional responsible for the procedure, checks whether taxes have been paid on time, whether the legislation is being complied with without errors and whether there is any tax advantage that may be of interest to the company.
How does this process work?
It all starts with the choice of the tax auditor, who should not have employment ties with the company. The professional is usually an accountant, as he must be qualified for the function and have experience in the area. Ideally, being a specialized company or an independent auditor, the responsible person should have a thorough knowledge of tax legislation, accounting processes and the financial sector.
The process takes place discreetly and impartially. The auditor checks the company’s documents to compare the taxes that have been paid with the project’s finances. The professional’s focus is to analyze if there was any fraud, any error in the payment of tax or, even, any failure in the processes. At the end of the procedure, the company manager receives a detailed assessment made by the auditor, who also suggests recommendations for actions that can be implemented and suggestions for proper tax planning.
A thorough evaluation
Most of the time, the auditor assesses the payment of taxes that involve the three spheres of government: Municipal, State and Federal. In general, he checks:
- Proof of payment,
- Bookkeeping accounting tax,
- Tax calculation receipts, etc.
As we have seen, tax auditing is a way of maintaining the company’s security. It avoids financial losses and even fraud. So that the enterprise is not penalized and does not damage its reputation and credibility, investing in this process is essential.