Thus, it’s a priority for most entrepreneurs and business owners to avoid, at all costs, an audit from the U.S. Virgin Islands Bureau of Internal Revenue. Although the odds of being audited by the BIR are quite low, it’s still not something any business owner wants to deal with—you have better things to do with your time and energy, to be sure.
Fortunately, there are some precautionary steps you can take to decrease the likelihood of an audit, as well as some actions you might take if you are facing a BIR audit.
Avoid red flags
There is a certain stigma attached to a BIR audit that is probably more than a little unfair. An audit doesn’t necessarily imply intentional wrongdoing. In fact, most audits are triggered by discrepancies between what two or more entities report to the agency. The BIR looks for those issues, and the easiest way to find your business being audited is by failing to submit accurate records in the first place. Double and triple check your numbers so that you can catch any mistakes before the BIR does.
Establish solid recordkeeping practices
Although being audited doesn’t prevent you from gathering up the necessary records after the fact, why put your business in that position at all? A system of thorough, accurate and organized recordkeeping may be the best thing your business can do to both ensure accuracy in your tax returns and support your calculations in the event of an audit. Consult a skilled tax professional about how long you should keep your business’s financial records.
No one gets excited to see a piece of mail from the BIR. But although a letter from the Bureau is likely not bearing great news, more often than not, it’s not something to dread. Often, you’ll receive a letter in the event of the BIR discovering an error in your tax return and requesting additional paperwork or a payment.
If BIR officials want to meet with you, it might be a different story—but even if that’s the case, remain calm and recognize that an audit does not automatically spell disaster for your business.
Don’t hesitate to get help
When the BIR has essentially pointed out a small error in your calculations or some other minor mishap with your tax return—which is much more common than a full-on audit as most people picture them—you should be able to handle the situation with ease, as it’s rarely more than a matter of supplying some corrected paperwork or sending a payment.
However, if the BIR has bigger concerns about your return, or if the situation seems more complex, you should consider seeking the input of an experienced business law attorney. In addition to providing technical expertise and guidance, a lawyer will provide the peace of mind you need as you deal with a BIR audit.
BoltNagi is an established and widely respected business law firm serving clients throughout the U.S. Virgin Islands.