It pays to be prepared with insurance accountant coverage when the client receives a call or letter from the tax authorities. There are instances when the accounting practice itself is being targeted for tax audit. On top of that, audits usually come at the busiest time of year and accountants have to stop everything they are doing to respond to the tax audit.
The Australian Taxation Office (ATO) has announced a crackdown on work-related expense claims of taxpayers. There are other red flags that can trigger an audit or review. Business activity statement audits are the most common including rental property owners and businesses involved in black economy.
There are lots of audits on restaurants and takeaway shops especially those with lots of cash transactions. Employer obligation audits are also expected to increase significantly with Super Stream in place to consolidate and streamline superannuation contributions made by employees.
Even if the results of the tax audit are positive, the client still has to pay between $3,000 and $4,000 for the process that takes 10 to 20 hours to gather all the information required. In the absence of protection, it will difficult to justify the costs.
Some public practitioners prefer self-insurance but it could be a case of small savings vs. paying the big costs later on. Some accounting firms prefer to cover their clients with self-insurance without realizing that they are becoming more vulnerable. The self-insurance model does not extend to external professional services which lead to unexpected costs for the client.
Random tax audit is now in full swing where even the most vigilant taxpayers are worried. Accountants must be prepared to respond confidently for their clients while clients must have the peace of mind that a response will be made without the need for a substantial amount of fees.
Data-matching tools are now being used by tax authorities and a lot of tax audits are about to happen. In this type of environment, it is important to have insurance accountant coverage for a cost effective protection. Having insurance will alleviate the stress of substantial professional fees. It can also put pressure on the accountant-client relationship.