The importance of being prepared for a potential audit from your landlord or bank:
“As a property owner, you’re always in the mindset that you might be audited by your mortgage lender.”
And if you find out that it is, “you want to make sure everything is in order so when they come in, they’ll find everything in order and you’ll sail through.”
So how do you prepare? It’s actually not too difficult. Just do some basic recordkeeping. Make sure your bills are paid and filed. Your invoices should be filed in chronological order with all appropriate details included. You should also have copies of your lease agreement and any amendments to the lease agreement. If there’s a dispute with your tenant, you at least have something more to work with.
Additionally, if your lender is giving you a hard time about their review of the property, or they want to conduct another look around the place or inspect some additional records, give them what they need so you can get back to business.
The best thing you can do is bring all necessary documentation together in one central location so it’s easy for everyone involved. You should also ask yourself how much information you’d like to share so that there are no surprises come tax day or at an audit. Keeping records organized and accessible will only help when it matters most!
If you own a business and prefer to do your own accounting services, it’s important that you’re prepared for potential audits from the tax authorities or the bank.
*When dealing with an audit, there are certain mistakes that can harm your case and lead to additional fines and fees. Let’s go over some of the most common ones so that you know what they look like so you can avoid them!
*The first mistake is not keeping records. All of your work must be documented. Remember: If the documentation doesn’t exist, neither does your claim. You should create very specific documents surrounding every transaction, transaction date, customer name/ID number, etc., especially when it comes to expenditures because this could make or break your case if it goes before the tax authorities or the bank.
*The second mistake would be not having all documentation together before you start compiling your records. It’s extremely important that every voucher, invoice, and receipt is accounted for to show where the money went if there are any discrepancies with the bank or tax authority. For example, someone might say that they didn’t receive a payment or solution for their problem; documentation will prove otherwise. So make sure every piece of paper has a place (file folders) and label them accordingly!