As a business owner, there are very few groups of people who can immediately strike fear into your heart, like Revenue Canada (or the IRS, or HMRC, etc.). Sometimes it’s because of something you did wrong. Maybe you missed a few payments or had errors on your employee's T4’s.
Even if you’ve been very diligent with your record keeping and remittances, there may come a time when you get a letter informing you that someone needs to look over your books. As a bookkeeper, I’ve had to sit in on 3 of these in my career, each one for a different reason.
Instead of spending the next few nights tossing and turning in a cold sweat, here are my suggestions on how to make it out alive and still relatively sane.
1. Be prepared
You will usually have a basic summary of what is being reviewed when you receive your first letter. Make sure you call the number on the letter, and find out exactly what information they will require when they visit. Having all the necessary reports ready in advance will give a good first impression and will make you less nervous during the meeting.
2. Be calm
Despite what you may have heard around a campfire, no winged demon will be descending upon your small business. These are regular men and women, just like you. They have families, stressful jobs, and plans for the long weekend too. So far, everyone I have dealt with has been incredibly easy to work with. They understand that you’re nervous and won’t assume you’re covering up a cocaine smuggling operation just because you forgot to print out one of the reports.
3. Be honest
Guess what? You don’t know every minute detail of your tax laws. You’re also not the only owner who’s behind on your payments. Don’t make up some elaborate excuse for why you got to this point. If you made a mistake, admit to it. Ask for advice, and really listen to their answers. They know as much about their business as you do about yours, so you may come away with some invaluable tips.
4. Be realistic
If you owe money, please be realistic about your ability to pay them back. If you bring in $5,000/month and you owe the government $20,000, don’t promise to have it paid next week. Just like in customer service, always under-promise and over-deliver. Promise to pay your bill in 6 months, even if you’re sure you can do it in 3. Surprises happen, and you’ll be glad you had that buffer in case cash flow problems arise.
5. Communication, communication, communication
At any stage of the review process, the worst thing you can do is to hide. Stop returning phone calls and miss payments without contacting them, and I guarantee you’re in for a very long year. Once again, bad things happen. They know this too. Maybe a big client didn’t pay you this month, and you won’t be able to make your payment. Call!! Let them know in advance, and make arrangements to catch up as soon as possible. You’d be amazed by how much trouble you can spare yourself with one uncomfortable 2-minute phone call.
I truly hope this post is (and always remains) completely useless to you. If, however, you should find yourself on the receiving end of one of those letters, I hope these 5 steps help you.
If you have any tips of your own or a horror story you’d like to share, add them to the comments.
If you are going through (or about to) an audit and would like some help or advice, feel free to contact me. I’m always eager to help.