An incomplete return, anomalies, vague explanations… Various scenarios may prompt the tax authorities to launch a tax audit. In that case, certain practices should be adopted and others avoided.
How should you react in the event of a tax audit?
What is the right conduct to adopt when the tax authorities contact you?
What mistakes should you avoid during a tax audit?
To help you get through your tax audit successfully, discover now the complete guide to good and bad practices when dealing with the tax authorities, written by your tax lawyer.
Reply to any request for information
When you receive a request for information from the tax authorities, the time allowed to reply is generally 30 days.
It is better to reply promptly and precisely. Indeed, if your affairs are in order, you will thereby avoid a tax reassessment proposal (proposition de rectification).
In any event, your silence is likely to be misinterpreted by the tax officer, convince him or her of your bad faith and, as a result, prompt him or her to issue a much more onerous request for clarification marking the start of a genuine audit, which your tax lawyer can help you avoid.
Follow up on any request for justification or clarification
Issued on tax form 2172, these requests, sent by registered letter with acknowledgement of receipt, absolutely must be answered within 2 months. In the absence of a reply or in the event of an insufficient reply, the tax authorities are entitled to react and assess you ex officio, the penalty then generally amounting to 40% of the tax evaded. It is therefore recommended to reply within the time limits and to provide very clear and concise arguments and supporting documents demonstrating to the tax authorities the transparency of your situation.
Asking for the inspector's visit to be postponed in order to push the problems back in time: save in exceptional cases, a mistake
Panicked by the notice of audit you have just received, you decide to contact the tax authorities to ask for the date of the visit to be postponed? This reaction is generally a mistake. Indeed, tax inspectors may interpret this request for postponement as a sign of weakness on your part (a sign that you consider yourself "in hot water") and/or as heralding a potentially difficult audit in which the taxpayer will do everything possible to disrupt the smooth running of the procedure.
Save in exceptional cases, there is no point in putting off the problem; you will have to face reality in any case, and the sooner the better, as a rule.
Be polite and courteous
It is advisable to establish a cordial relationship with the auditor. Avoid any systematic challenging and do not put yourself in an adversarial position. In short, banish any trace of aggressiveness, at the risk of giving the impression that you are actually hiding something. In that case, the inspector tends to dig even deeper. So remember to make the inspector comfortable, taking care to choose a neutral room with no internal documents and no employees present in the case of a tax audit targeting a business.
Improvising: the risk of saying too much
Under the stress of a tax audit, some people start saying more than they are asked. Since anything you say may be used against you, it is advisable to answer only the questions asked by the auditor and to take time to think if you are not sure of the answer to give, or to turn to a tax lawyer to represent you before the tax authorities. In the case of a tax audit of a business, the company's manager should therefore make sure to brief employees before the inspector's visit so that they do not volunteer information on their own.
Tax officers are curious, which is a quality in their case, as it often allows them to gather new information to exploit. They very much like listening to you. Confine yourself to strictly answering the questions put to you; there is no need to add anything.
Seek the help of a tax lawyer
Of course, the assistance of an experienced professional, such as a tax lawyer, can prove very useful. Indeed, the lawyer can defend you in two ways:
- On the merits: verification of the grounds invoked by the tax authorities. Are the tax authorities really entitled to reassess you? The tax lawyer will scrutinise the tax authorities' arguments and test them against the law.
- On procedure: rigorous examination of the procedural rules governing the audit. This last point is particularly interesting given that certain procedural defects may result in the nullity of the tax audit carried out by the tax authorities. Here are a few examples of omissions giving rise to possible procedural defects:
Statement in the notification of the names of the auditor's hierarchical superiors
Statement in the notification that the audited taxpayer may be assisted by an adviser
Indication of the years subject to the audit
Obligation for the tax auditor to remind the taxpayer of his or her rights and to explain how the procedure will unfold
Adversarial debate
Limitation periods exceeded
No signature by the divisional manager where surcharges for bad faith are applied
And thousands of other possible failings in the event of non-compliance with certain texts specific to the taxpayer's situation...
Trying to impress the inspector: a very bad idea
Officers of the DGFIP (French Public Finances Directorate General) are keen to demonstrate the independence of their administration. Attempting a show of force by welcoming the auditor in the presence of a whole cohort of advisers and/or your closest colleagues is therefore likely to complicate the conduct of the tax audit and prompt the inspector to be even more meticulous. Keep it to a small group and let the inspector conduct the audit as freely as possible. You will have plenty of time to point out his or her errors later, once you have received the reassessment proposal.
Avoid obstructing the tax audit
Obstruction of a tax audit (opposition à contrôle fiscal) occurs when the audit could not take place because of the taxpayer. This is the case in particular when the taxpayer:
- Is absent on the date set for the start of the tax audit and remains absent for several months without any possibility of reaching him or her
- Refuses to provide the tax authorities with his or her accounts/supporting documents or provides very incomplete information
- Delays the resumption of an audit of accounts through delaying tactics
You should therefore make arrangements for the tax audit to proceed properly in order to avoid tax adjustments automatically increased by 100%. Yes, 100%!
Discuss with the tax authorities
Additional tax is being demanded following the tax audit? Instead of immediately considering going to court after a formal tax claim (réclamation contentieuse), you can opt for an amicable route to challenge the tax reassessment. This can take various forms:
Make an appointment with the departmental contact officer (interlocuteur départemental) or your auditor's hierarchy
Refer the matter to a specialised commission or committee with authority over a dispute between a taxpayer and the tax authorities: the Tax Abuse of Law Committee (comité de l'abus de droit fiscal), the departmental tax commission (commission départementale des impôts).
Make a hierarchical appeal (ask to meet the auditor's hierarchical superior, who is generally the head of the audit team). In practice, this appeal is quite effective. It makes it possible to discuss directly with the head of the department and to point out, face to face, the substantive and procedural shortcomings of the audit, as well as to explain the taxpayer's situation in a simple and direct manner.
Submit a request for leniency
This does not allow you to challenge the reassessments themselves, but it does allow you to ask the tax authorities for leniency on the surcharges.
Negotiate with the tax authorities: the settlement
In the case of fines and/or surcharges, a settlement (transaction) consists in negotiating with the tax authorities a reduction of the amount they are claiming from you, in return for your undertaking to pay the "bill" promptly and not to bring any proceedings.
Although the tax authorities are under no obligation to accept, they nonetheless relatively often agree to such negotiation in order to collect cash quickly and close the file as soon as possible.
Our tax law firm can assist you.
