Tax Audits & Investigations

Check of Records
Checking records such as ledgers, journals, invoices and bank accounts is an important part of an audit. This is a job that usually takes most of the time. The investigator can take the records back to their office and go through them, or they may carry out the audit inspection in your own premises.

If they remove your records they will issue you with a receipt, detailing every item that has been taken and of course if you need access to them, this is possible or copies can be made if necessary.

The size of your business may determine whether the audit checks will be carried out on your records at your premises or taken back to the IRD offices.

How Long Does an Audit Take?
There is no set time for an audit. It will be affected by the size of the business, as well as its complexity. It can also be affected by the standard of your records, whether they are good or bad and of course where they receive full cooperation from you or whether you are hindering the audit process.

Because IRD realise that the audit can affect your business, they will do everything in their power not to inconvenience the usual day to day running and minimise any disruption.

Finalising the Audit
There is usually a final interview to discuss issues that have arisen from the audit and to let you know of any adjustments that may be necessary to your tax situation. If there are no adjustments required to your tax, then a letter will be sent to you finalising the audit.

If your tax has been adjusted and no agreement is reached, then they will issue you with a notice of proposed adjustment (NOPA). This notice will explain the adjustments and the reasons for them and will give you an opportunity to dispute them through the disputes process, to ensure that your rights are protected, especially if the matter goes further to a court hearing.

Notice of an Audit
You can expect to be given reasonable warning of a tax audit, except where IRD wish to carry out an unannounced visit.

You are required by law to let the tax investigator into your business premises when they call. You are also required to supply all records, including private records or bank accounts when so requested unless these are covered by legal privilege.

The IRD people are not entitled to force their way into your premises and they have no right to seize records that you do not produce for them. They can, however, take action against you if you don’t allow them access to the information they need in order to carry out a full audit.

They also have the right to enter your private dwelling if an access warrant has been obtained from the courts.

Confidentiality and Privacy
The Inland Revenue Department audit staff members are required to keep confidential and private any information they see or receive in the course of their audit work. You can therefore feel confident that all your records will be kept strictly confidential.

During an audit they may also collect information about you from interviews, discussions or from your records. This information may be needed to assess your tax liability under the tax laws.

You have to answer all the questions that are asked and you must provide any information requested. All this data is kept private under the Privacy Act 1993.