With the government currently pumping cash into IRD audits it’s what we call AUDIT SEASON so here’s some things you can start doing right now to help you breeze through an IRD audit if you’re ever unlucky enough to be targeted (and if you happen to be wondering why you were targeted then check out our Idiots Guide to getting an audit):
- Never ever throw away your bills or invoices and better yet store them in your xero accounting software. It’s free off-site storage which we absolutely adore. If that’s too ‘techy’ for you then keep them in a dusty old box somewhere safe for at least 7 years because that’s how long the IRD’s got to get you!
- Don’t even bother trying to claim personal things like movies, haircuts, massages, therapy, speeding fines, Sky TV, makeup, shoes or clothes (unless it’s protective clothing or advertises your business).
- Everytime you buy business food or drink write on the receipt who you were with and why it’s for business (and don’t believe your mates when they try and trick you into claiming your daily coffee or lunch because they’ll be in for a rude shock if they’re audited for it. A great little rule is to never take tax advice from someone until they’ve clocked up atleast the 7 years it takes to qualify as a Chartered Accountant and even then you might come across the odd doozy accountant that’ll put you wrong).
- Keep detailed paperwork showing exactly how you calculated your GST returns and don’t even think about making up the numbers or doing random adjustments because that’s the type of stuff you’ll go to prison for.
- Be incredibly careful using ‘general-expenses’. Only ever use it as a last resort or give us a call and we’ll help you find the perfect place to put those unusual bills.
- Don’t blindly claim GST on absolutely everything you buy. It’s far easier to have a quick look at the invoice which’ll tell exactly how much GST you can claim (especially for overseas bills like iTunes, Google-Adwords (no GST) or New Zealand Customs). If you don’t have an invoice then chances are that there’s no GST (like bank fees, interest or home-rent) and paying things off makes it really tricky to get it right so it’s always best to talk to us about claiming GST on Accident Compensation levies, Insurance or Hire Purchases.
- Pay all your business expenses out of the business bank account and pay exactly what it says on the invoice (not rough amounts like $200 here and there) and keep the personal stuff out of the business account.
- Hang onto your bank statements or download the online statements and save them somewhere safe.
- Be ultra efficient and save emails, itineraries and meeting notes for business trips.
- Before you file your employer return (the one you send to the IRD each month for the staffs wages) check that it matches the wages you paid out of your business bank account.
It’s also a great idea to be nice to the IRD investigator. They’re just doing their job so getting aggressive or plonking them in a dark and murky part of the office isn’t going to help your relationship any. Nor will trotting out that tired old line about you actually being their boss (because the taxpayer pays their wages) and if they have any quirky little traits (like extra long nose-hair) then try and keep it to yourself!
Talk to us if you’d like to know more about other stupid things that’ll catch you out in an IRD audit. And remember the IRD’s got seven years to audit you so, if you’ve made a few accounting slip-ups, it’ll be a long wait until you can breath easy again. If you’re after a Chartered Accountant that really cares about keeping you safe then you’re welcome to join us for a coffee to chat about what Boutique Financial can do for your business. Please see our website for more details (including our worry-free fixed prices).
Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation. This blog must be read in accordance with our disclaimer and terms of engagement.
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