Everything you should know about a Tax Audit

December 28, 2018 | Author: | Posted in Business

What is the Tax Audit?

Tax audit is the formal examination conducted by the IRS to verify information or to detect the fraud and error in business record and computation of tax, During the self-assessment by businessman, chance of error may be more, to rectify all error ,Every organization should use best accounting software to manage all transaction and true calculation of taxable income. A tax audit is the verification of books of account of an assessee to validate the income tax computation and compliance with the law of income tax.

An objective of Tax Audit

  • Ensure proper maintenance and correctness the ¬†of the book of account and certification of the scheme by the tax auditor
  • Reporting of observation noted by tax auditors after a methodical examination of books of account
  • Reporting prescribed information such as tax depreciation, compliance of various provision of income tax law etc.

Tax audit Limit

The provision related to tax is provided under section 44AD of the income tax act. According to section 44AD, tax audit required for the following person:-

  • Business
  • Profession

Prescribed Audit form

  • Form 3CA
  • Form 3CB
  • Form 3 CD

Due date of obtaining the audit report

A taxpayer has to obtain an audit report on or before 30 September of the relevant assessment year, In case of taxpayer obtaining 3CE audit report, the due date is 30 November of the relevant assessment year.

How to handle your tax audit

For all type of audit, the IRS begins the audit process by sending a notification letter to the taxpayer, If you are received a notification letter, you should first read the letter carefully. the letter should contain important information, such as the reason, why your tax return is being examined.

Tax Payer Right

The taxpayer has the right to know what step to take to comply with tax law. There are several rights which apply to tax as well:-

  • A right to professional and courteous treatment by IRS employee
  • A right to privacy and confidentiality about the tax matter
  • A right to representation, by oneself or an authorized representative
  • A right to know why the IRS is asking for information, how the IRS will use it, and what will happen if the requested information is not provided.

Revision of tax audit report

Tax audit report filled cannot be revised under normal circumstance. However, in case the accounts are revised in the following circumstance:-

  • Revision of account of a company after its adaption in annual general meeting
  • Change in law with retrospective effect

Change in the interpretation of the law

The penalty for not audited

If the books of account of a business or profession are not audited as per section 44AB, there is penalty of 0.5% of the total turnover or Rs 1,50,000 whichever is less ,however if a person has a reasonable cause for non filing of the tax audit report, then such a penalty may not be levied on him.

In many cases, implementation can be a bigger consideration than the actual software chosen when it comes down to the total cost of ownership for the business. Accounting software describes a type of application software that record and process accounting transaction within functional modules such as account payable account receivable. It functions as simple accounting software that will help in maintaining a proper business record and also help to the calculation of tax payable. Accounting software that allows to easily manage money flowing in and out of your business. Manage your customers and invoice, while keeping expenses in check.

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Merrchant online accounting software provides the best feature to maintain all your bookkeeping problem and help you to take best decision with all the features inside it.

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Merrchant provides world's best Accounting Software & GST Billing Software for small business in India.

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