What is a tax audit

7 mistakes founders should avoid before a tax audit

Most entrepreneurs are afraid of this: The tax office comes for a company or tax audit. Anyone who has just founded their company usually pushes the thought of it very far away: "Doesn't concern me anyway." However, this is a mistake that can quickly become expensive. Because the tax office is allowed to audit any company, regardless of whether it has existed for decades or only recently.

In this guest post from our partner felix1.de you will learn 7 sources of error that you as a founder can avoid in the run-up to a tax audit or that cause the tax office to initiate a tax audit in the first place. And there is also a practical tip on how you should behave when the auditor is actually at the door as part of an external audit.

# 1 Invoices are incomplete or incorrect

Only a correct invoice entitles an entrepreneur to deduct input tax. So make sure that you get a proper invoice for all purchases and purchases. In particular, the sales tax must be shown separately, the invoice issuer, invoice recipient (each with full name and full address) and tax number, a service description and the service date must be available and the invoice number and invoice date must be noted .

If the tax audit reveals that invoices do not meet the legal requirements and important elements are missing, the tax office cancels the corresponding input tax deduction.

The reverse applies: You too have to send your customers proper invoices. Otherwise the tax office can - in the worst case - estimate sales. This happens especially when invoices are not numbered consecutively and without gaps.

# 2 The bookkeeping is flawed

"Tomorrow, tomorrow, just not today ..." Anyone who messes up with accounting will deeply regret it at the latest at the tax audit.

Therefore, the urgent advice: Sort all documents, invoices, contracts, receipts and other documents relevant to accounting regularly and promptly and keep them in an orderly manner. So you are well prepared for short-term exams. By the way: It's easier with an electronic solution.

If you discover in advance of a tax audit that something is missing, make sure you get the missing documents before the auditor comes. In this way you avoid critical queries.

  • When it comes to accounting, the tax experts from our partner felix1.de are at your side with advice and action.

# 3 taxes are "forgotten"

As an entrepreneur, depending on the legal form, you come into contact with income tax or corporation tax and sales tax, possibly even with trade tax and - if you have employees - also with wage tax.

Even if the first few years after founding the company may be difficult and often do not make a profit, the following applies to income tax: As soon as you make a profit, be sure to put some of it aside. This is especially true if you have not yet made any advance income tax payments. If the tax office notices during the tax audit that you have not paid any taxes for a whole year, it will have the outstanding amount within a short period of time and in full. The advance payments for the current year can also be added. For a young company, this can quickly mean bankruptcy and thus the end. So don't reinvest the entire profit straight away, but save something for the tax office. When making new purchases, it is sometimes even advisable to take out a loan, if possible.

If you charge your customers the sales tax, remember: You are not allowed to keep this, but have to pay it to the tax office. This happens within the first two years after the establishment of the company monthly with the sales tax pre-registration.

So don't plan on this money because it doesn't belong to you.

# 4 VAT return and pre-registrations do not match

Your advance VAT returns should be as correct as possible. If there are regularly larger deviations, for example because you have not (or not correctly) declared income due to the sheer accounting chaos, the tax office will listen - and will probably stop by for a tax audit soon. For the tax office, this is an indication that you are not exactly that precise with your pre-registrations and your bookkeeping.

# 5 Cash payments into the business account

Of course, cash payments are allowed to the business account. However, you have to be able to explain in a credible manner where the money comes from. Otherwise, it can end badly if the tax auditor is at the door for the tax audit and asks for proof. Because if you do not succeed in providing evidence, the tax office will demand taxes for the corresponding amounts. And that can quickly get a young company into financial difficulties. You should definitely avoid such a situation from the start.

So make sure that you explain adequately and have proof of where the deposits come from. By the way, just pointing out that it is private cash is not enough. Instead, it is necessary that you document every cash inflow and outflow - if you have a cash register, then in the cash book. Notes when and how much cash was withdrawn or deposited.

You are safe if you completely avoid private cash payments to the business account.

# 6 Tax returns are always late

You have to submit a tax return for each year and as punctually as possible. Otherwise, the tax office will eventually become suspicious and will take a closer look at your company to find out why you are so late.

# 7 Submission and payment deadlines for tax returns are not observed

Entrepreneurs who have to pay income tax, sales tax and trade tax have a full calendar: Because the respective advance payments are due on different dates during the year.

  • Income tax 10.3./10.6./10.9./10.12.
  • Trade tax 15.2./15.5./15.8./15.12.
  • Sales tax 10 days after the relevant pre-registration period has expired

If there are repeated late submissions of tax returns and late payments, you will not only be punished by late payment penalties, but at some point you will also be drawn to the attention of the tax auditor.

Practical tip: How do you behave correctly when the tax auditor is actually at the door?

Even if you submit your tax return on time and avoid all other sources of error mentioned, that is no guarantee that the tax office will not order a tax audit at some point. In this case you should do the following:

  • Before the start of the audit, have the auditor's ID shown so that no unauthorized person can see your confidential documents.
  • Provides the auditor with a table and chair and presents the documents that he requests. He can also take a look at your company and talk to employees.
  • It may be advisable to consult a tax advisor for the examination. This makes sense especially if he has taken care of your bookkeeping and you are very inexperienced and insecure about tax matters.

And very important: stay calm!

Because the tax auditor does not carry out the tax audit to annoy you. His job is to ensure that everything runs correctly in the company from a tax point of view and that the tax authorities receive the money they are entitled to. So there is no reason to be unfriendly or uncooperative - no matter how uncomfortable the tax audit is.

Tags:Tax auditAccountingTax Tax audit