revenue audit question

my sister is about to be audited. - for late returns -i think.
i have sat down with her and found undecleration of vat of 2 k for 09, and about 2k for y/e 10. my income tax return is ok for 09, but is out for y/e 10. (basicly she lodged everything to the bank and did her returns on the basis of lodgements however she inadvertadly left out a bank statement in her calculations.
i think her income tax for y/e 10 is understated by about 4 k. (another mistake).
anyway, my question,
If she owes 2k for 09 and say 6k for 10, how much could she have to pay the revenue incl int and charges.
she has not done her vat returns for y/e 11 yet.

she got the letter las wed and has not slept or ate since, she has an appointment with an accountant but not until the 2 days before they come out. any help please.- no judgemental answers - we cant take it.

the first thing the revenue inspector will ask will be do you have anything to declare, so if you are up front and say "I'm out by 8k because of mistake x,y & z" they dont hammer you to the same extent as if you tried to hide it.

one thing the pros might give you a opinion on is doing a supplemental return before the audit and paying up the balance, so by the time the inspection comes about all is in order.

Another thing to think about is to hand all the information to the accountant and let them deal with revenue on your behalf.

thanks contempory.
it was a genuine mistake, she prepared her returns 7 days after coming out of general surgery and forgot to add some invoices to her returns.
we are just wondering now what penalties will be imposed.

She (or the accountant) should write to the Revenue requesting that the audit be delayed as she wishes to make a prompted disclosure, that will delay the audit to give her accountant enough time to go through all the records to ensure that they are the only mistakes.

I am wondering, how was the VAT errors not picked up when the accounts were being prepared, or was an accountant not engaged for the year end tax returns?

When is the audit and why can she only get an accountants appointment for two days prior to the audit, is the accountant aware of this issue?

the accountant mentioned (she has a vague recollection) of the sales being different to the bank lodgements.
the accountants are engaged to to the final returns and prepare accounts.
she is terrified.

First thing is not to be terrified and to take action. Revenue have a scheme which allows people to make voluntary disclosures which reduce the possible penalties etc. Her accountant should be telling her this, has she not discussed it with the accountant. And it would be a very good idea to hire the accountant to deal with the auditors.

powercity said:

the accountant mentioned (she has a vague recollection) of the sales being different to the bank lodgements.
the accountants are engaged to to the final returns and prepare accounts.
she is terrified.

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The accountant should have established that and advised your sister at the time to make an amended VAT return, its pretty much a standard practice when preparing a set of accounts to check the VAT on sales for the year to the recorded sales in the year end accounts, ton confirm that they agree or establish why not. Generally you would also check the VAT liability per the accounts to the outstanding returns as they should also agree or be reconcilable, thats why I asked who prepared the year end accounts.

There is no need to be scared, once she (through her accountant) makes a full disclosure and makes the payment (or comes to an arrangement) to clear the liability and the interest & penalties, this will go away, there might be a follow up audit in three or four years, but she shouldn't worry, the important thing is to make the disclosure.

Revenue audits are not bad at all - I've had 2 of them.

First impressions are everything. Are books tidy and up to date? - if so, it makes cross checking quite easy.

If you've picked up on a couple of errors, you simply declare them beforehand, show how the error was made and if its geuine and everthing else is fine, you normally can get away with just the payment + interest (possibly a 10% penalty).

But all in all quite a pleasant experience if your books are in good condition.

Hint - have decent coffee and decent biscuits available

mcaul said:

Hint - have decent coffee and decent biscuits available

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And tea! Not all tax inspectors drink coffee...

Although maybe if you didn't offer such good hospitality you wouldn't have had a second visit...!

Seriously though, there's nothing to be terrified about - the accountant would appear to have been a bit sloppy in all of this, but at this point the individual involved just needs to acknowledge the mistakes, make the relevant disclosures and come up with a proposal for how they'll pay the liability.

It may be worth considering getting a new accountant though OP, and getting the new one to deal with the Audit - they'll have no problem blaming the old accountant for the mistakes, which could help to minimise the penalty...

been thro 2 audits over the years.... i too was terrified tho there was absolutely nothing to hid or hidden...
be upfront and honest... if you have nothing to hide all will be ok,.
there will be interest and charges, but it won't be massive, you can give them the returns on the first day of the audit they will sit down and ask you some questions and then ask if you have anything to disclose......
they are only human too and realise that most people are nervous.....

Audit done and dusted. Made a prompted disclosure and have agreed a repayment schedule. We would never want to go through this again.
Any way, the amt involved is very small. The odd can of red bull on a diesel receipt!!!
Vat not allowed of phone credit bought through the bank. - lesson learned.
Accounts bill is larger than the tax bill. Lesson also learnt here.

To be faced with two officials brandishing IDs quoting this law and that rule. Then having to go through a MASSIVE list of questions. 2 days.....

If anyone needs to go on a crash diet - request a revenue audit

Any way thanks to everyone who responded and I hope that my questions raised and the replies received help anyone in a similar position.