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What to do when Inland Revenue calls

When Inland Revenue says your business is to be audited, the most important things to remember are: be prepared and don’t panic. You may even come out of it with a tax refund.

What’s an audit?

An Inland Revenue audit looks at your financial affairs to make sure you’ve paid the right amount of tax and complied with tax laws. It could be a simple check of your GST registration or a full examination of all your business and personal records.

What is an audit? (external link) — Inland Revenue

Your business tax obligations (external link) — Inland Revenue

Who gets audited?

Inland Revenue can audit any business. It uses a range of methods to select who to audit, but won’t disclose the reason you have been chosen.

Inland Revenue may sample your records to see if an audit is needed. If everything is okay, the inquiry ends there and Inland Revenue will confirm you won’t be audited.

If an audit is necessary, you’ll get a letter telling you what records Inland Revenue needs to see, with an information sheet on how the process works. Usually, Inland Revenue will follow up with a face-to-face interview to learn more about your business and answer your questions.

Some audits focus on a small part of a business. In these instances, Inland Revenue may not need to meet you and may instead choose to conduct the audit by email or through your tax agent. If you have not given consent to receiving emails, you will receive letters instead.

A basic audit will look at your business records, such as:

  • ledgers
  • journals
  • invoices
  • payroll records
  • bank statements.

More information might be looked at, depending on the nature of the audit.

How long do audits take?

Audits, like the businesses they look at, are all different. At the start of the process, Inland Revenue will give you an estimate of how long it thinks the audit will take.

Results

Near the end of the audit, Inland Revenue will meet you again to discuss its findings. It should be clear at this point if you’ll get a refund or need to pay more tax.

The auditor will also tell you where you’ve gone wrong and how to put things right.

Business audit video (external link) — Inland Revenue

Guide to audits (external link) — Inland Revenue

Prepare for your audit by checking your records — if anything is missing, contact Inland Revenue straight away.

Prepare for your audit by checking your records — if anything is missing, contact Inland Revenue straight away.

If you think you’ve made a mistake, ask Inland Revenue about voluntary disclosures.

Voluntary disclosure

Telling Inland Revenue what’s wrong with your tax affairs anytime before the conclusion of an audit is called a voluntary disclosure. An advantage of doing this is that it may reduce any tax shortfall penalties. Read more about voluntary disclosures on the Inland Revenue website.

Voluntary disclosures (external link) — Inland Revenue

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