A Quick Guide On Tax Audit Insurance

As a business owner, keeping up with all of the kinds of insurance that you might need can feel like a whole new job. Sadly, you can’t get an employee for that. There’s a lot of risks that come with owning and operating for your business, and many forms of insurance exist as counterpoints.

Amongst those options sits audit insurance, which is actually fairly new in a few places like the AU and NZ, having been around for only 25 years.

What is it?

A lot of people fear undergoing an audit. Those who’ve never faced it dread it, though who’ve gone through it know it can be intimidating and stressful, even if they do everything right. So where does tax audit insurance factor into this? It’s there to insure you against the costs of professional fees that being audited bring, generally covering things like employing accountants, lawyers and other advisers.

What’s the cost?

Audits are entirely subjective, so an exact number is hard to pin down. But one thing that is easy to pin down is the fact that tax audits will hurt the wallet. Without audit insurance, your business will shoulder all the costs of the audit. Audit length affects cost, and the most basic audits can take up a few weeks, with longer audits, which take years, coming with astronomical costs. On top of that, a clean business, operating without using liberties or shortcuts, can still face large audit costs, so you and your business need to be prepared.

Will I need it?

Probably. Tax audits in certain places are becoming more and more frequent, with government agencies taking their audit benchmarks seriously, so the chances of getting audited are higher than they are in the past.

Anything in particular to consider?

  • Not all tax office reviews are considered a formal audited, so make sure that you know what your policy will actually cover you for.
  • Just because you’re the one taking out the policy, it doesn’t mean you’re the one getting covered by it. Some of these policies cover the accountant, not you and your business. Double check if that is the case.
  • Consider other options before a policy from your accountant as they often get commissions from it. It doesn’t mean there’s something dodgy going on, it just helps to do some research.

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