Topics
Why
Am I Being Audited?
What Happens
During an Audit?
Records
Penalty and Interest
What Happens
After the Audit?
Further Information
Why
Am I Being Audited?
Purpose
of the Audit
Taxpayer
records are audited to determine if taxes have been correctly
collected, reported, and paid.
Are
All Taxpayers Audited?
All
taxpayers may be subject to an audit. This includes individuals
and businesses located in the Province, as well as those
located out of the Province who carry on business in Saskatchewan.
I
Have Applied for a Tax Refund. Why Am I Being Audited?
Refund
claims are examined in detail to ensure the refund is
payable. An audit may be conducted at the same time to
ensure that all taxes owing have been paid.
Why
Am I Being Audited If I Do Not Make Taxable Retail Sales?
Although
certain businesses or taxpayers may not be making taxable
sales, they are required to pay tax on purchases and leases
for their own use, including equipment, supplies, and
taxable services.
What
Happens During an Audit?
Initial
Contact by the Auditor
If
you are selected for a field or desk audit, an auditor
will contact you by telephone or letter. The auditor will
arrange an interview, advise what records will be examined
(see Records), and ask that these
records be made available at the audit location. Field
audits are normally conducted at the taxpayer's place
of business. In the case of a desk audit, the taxpayer
will be asked to send copies of requested records for
the audit.
The
Audit Period
Audits
normally cover two years plus the current year. Audits
may be extended if problems are found.
Areas
of Examination
The
principal areas of examination are your sales, tax liability
account, purchases, and fixed assets. An audit may cover
all or part of these areas. During the audit, the auditor
will verify the following:
- For
sales and taxable services to your customers, that tax
was applied and calculated correctly, and accumulated
in a tax account.
- For
the tax liability account, that all taxes levied and
collected have been accumulated correctly and remitted.
- For
materials and supplies acquired for your own use, that
tax was paid on all taxable purchases and leases.
- For
in-shop manufacturing labour, that all taxes were calculated
correctly and accumulated in a tax account.
- For
fixed assets, that tax has been properly accounted for
on all acquisitions.
Audit
Conclusion
After
the auditor has conducted the audit, it may be determined
that you are properly collecting and remitting the tax,
or that a tax liability exists. If the audit discovers
a tax liability, the auditor will discuss the reasons
with you. The auditor will also give you copies of the
relevant audit working papers.
The
auditor will provide you with an Assessment Notice that
outlines the audit findings. If information becomes available
after the audit that you feel warrants an adjustment to
the assessment, please contact the auditor.
The
auditor will ask you to pay the assessment by providing
a cheque payable to the Minister of Finance. Please note,
payment is due within 30 days from the date the Assessment
Notice is issued. If you are unable to pay the assessment
at this time, please provide the Collections and Enforcement
Section of the Revenue Division with a proposed payment
plan. Collections and Enforcement can be contacted at
1-800-667-6102 (or 787-7684 in Regina), or in writing
at 2350 Albert St., Regina, S4P 4A6.
If
you disagree with the audit findings, you should contact
the auditor or provide a letter to the Audit Branch outlining
the reasons for your objection. The branch will review
your objections and provide a written response.
Records
What
Records Should Be Available for Review?
The
auditor will normally request some or all of the following
records:
- Financial
statements (income statement and balance sheet, including
any schedules of capital additions and deletions).
- The
books from which these statements are derived (e.g.,
general ledger, sales journal, purchases journal, general
journal, cash receipts journal, cash disbursements journal).
- Source
documents, such as sales invoices, purchase invoices,
import documents, tax returns, bank statements with
cancelled cheques, and copies of deposit slips, contracts,
and agreements.
- Other
records or correspondence that contain information pertaining
to a tax issue.
Records
Stored Off-Site
If
you have some records in storage, consult with the auditor
to determine which documents will be required before retrieving
your records from storage.
Why
do you have to examine my financial statement information
if you are looking at the Provincial Sales Tax?
Financial
statement information provides information that allows
the auditor to verify that the tax information that has
been reported is reasonable. It also provides the auditor
with information on company acquisitions and operating
expenditures.
Why
do you have to review my purchase invoices?
You
are required to pay tax on the cost of goods purchased
for your own use. Examination of purchase invoices is
the only way the auditor can verify whether tax was properly
paid.
Penalty
and Interest
Penalty
A
10% penalty applies to any tax assessed. The maximum penalty
that will be assessed is $25,000. Where a taxpayer has
a credit under a different provincial Act, penalty will
apply on the difference.
Interest
Interest
is calculated based on the prime lending rate paid by
the bank holding the Government of Saskatchewan's General
Revenue Fund plus three percentage points. This
interest rate is adjusted semi-annually.
Where
a taxpayer has paid tax in error, interest will be payable
on the refund. The interest rate for refunds is the prime
rate.
Why
are penalty and interest assessed when errors are found?
Penalty
and interest are levied on audit assessments to encourage
voluntary compliance. The vast majority of businesses
collect and remit tax properly. However, without a deterrent,
such as penalty and interest, those businesses so inclined
not to remit tax would do so without repercussion. Penalty
and interest may be waived in certain situations (e.g.
serious illness to a key employee).
What
Happens After the Audit?
If
a taxpayer still has concerns after discussing their issues
with the auditor, they have the right to appeal the audit.
In most cases, an agreement is reached between the department
and the taxpayer regarding the tax owing and an appeal
is not required.
What
Happens If I Have New Information?
If
you discover new information that may reduce the assessment
after the audit is completed, please contact the auditor.
The information will be reviewed to determine if an adjustment
is warranted.
Appealing
the Audit Assessment
The
auditor will try to resolve as many of the issues with
the taxpayer as possible before referring the audit to
his or her supervisor or manager. If an issue cannot be
resolved by the auditor, the supervisor will become involved
and a further attempt is made to reach an agreement.
If
agreement with the audit findings cannot be obtained,
the taxpayer should make payment of that portion of the
audit to which they agree to avoid further interest accruing
on those amounts. On those issues where it is determined
that an appeal is required, the Collections and Enforcement
Section will issue a Notice of Assessment. When a taxpayer
receives the Notice, they have 30 days to forward their
reasons for the appeal to the Board of Revenue Commissioners.
The
Board will then set a date for the appeal to take place.
At an appeal, you will have the opportunity to present
the reasons for your appeal to the Board. You may represent
yourself at a hearing or have someone represent you (such
as a lawyer or accountant). The Department of Finance
will be represented by counsel at the hearing, who will
present the Government's case. Decisions of the Board
of Revenue Commissioners can be appealed to the Court
of Queen's Bench.
Further
Information
If
you have concerns with respect to a specific audit, please
contact your nearest Audit Branch
Office.
For
information on how specific taxes are applied, please
see the following pages:
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