Minimizing the Risk of Client Audits
The global trend toward curbing work-related expenses, by auditors and accountants alike, has come under increasing scrutiny. Authorities and regulators recognize that the tax gap for individuals, not in business, is driven primarily by incorrectly claimed work-related expenses. Common errors include claiming deductions where there is no connection to income, claims for private expenses, or no record showing that expenses incurred. This spotlight leads to the risk of increased client audits, the cost of which is borne by all concerned in terms of time, stress, and expense.
The situation of questionable client audits is one tax accountants want to avoid. Not only is their client exposed but also their own business is subject to unwanted regulatory attention. The reality is that the great majority of tax accountants do the right thing, but they are only as effective as the data they have at hand. As such, possessing both accurate information and effective tax technology is essential. An example of such technology is the Australian “Onvio Tax Audit Alert”. It compares work-related deductions against official statistics based on occupation, gender, and taxable income. It provides and acts as, a warning signal if someone is claiming above the official average. Having this type of data that tax accountants can share with clients is priceless, as it empowers practitioners with an opening to have the “difficult conversations”, providing them with an unbiased, objective (and accurate) basis to say “the likelihood of you having an audit is much higher. Are you telling me the truth?”
Such pioneering alert technology is relevant in substantiation and minimizing the risk of an audit while maximizing refunds. More significantly, it levels the playing field between officials and tax accountants in terms of data-matching capabilities and technological sophistication. Regulators have several means of comparing your data against others. Now, tax accountants also have this ability. From farmers and salespeople to travel agents and traders, a multitude of occupations are covered in the technology’s scope. This gives both parties peace of mind and enables customers to become an expert. Moreover, as clients recommend the service and technology to peers, it also encourages growth in terms of a client list.