The tax laws are such everywhere that self employed are perfectly placed to manipulate laws to a certain degree, if they decide to. And in some countries, the self employed make mockery of tax laws.
The current expenses are filled with all sorts of headings to escape taxes. Current expenses are probably the easiest way to escape taxes.
Auditors are well aware of the tricks that self employed businessman undertake to get away from paying taxes.
That’s the reason, why self employed are audit targets.
If you look at the way how most self employed individuals operate, you would notice the ease with which they add their household expenses to the list of current expenses.
They feel nobody looks after them, and they could easily fox tax laws. You just cannot blame them for how they think. It’s the laws that allow them to think that way.
Auditors are therefore, a bit stern on the self employed.
What makes an auditor suspicious is the life style a self employed guy lives.
If the auditor somehow feels that the guy is having more than what he has stated in the account books, then the self employed guy would be in deep waters. The auditors probably start grilling him profusely.
The training module makes auditor well prepared to ask the self employed individuals with all sorts of questions right from his personal finances to professional expenditures.
There is a lot of reason behind why auditors suspect self employed individuals.
Take a simple instance here; if you are a self employed individual, and you are on a vacation, you had probably gone for an outing to a neighboring resort, some 300 kilometers away.
Now when you come back and sit to write your expense sheet, you fill your current expense sheet with the fuel expense that you had incurred, while you were on a vacation with your family.
The family outing has turned out to be a business trip on the accounts sheet. The auditor, when he sees that begins to ponder, and he starts grilling.
He wants to inquire the exact reason for that trip. Those are gray area where a self employed gets trapped.
If you handle too many cash dealings in your business, then you could be assured auditors look exactly for a person like you.
There is another very significant reason for the auditors to target self employed. Self employed individuals list their employees as hired contractors. But in realty these contractors are employees of the firm
Finally, the best way to feel safe from the auditors is to hire a tax consultant. A tax consultant will make you aware of the tax laws that might have changed, and you as a self employed are not aware of those.
A tax consultant also helps you to avoid costly mistakes which you might commit if you are on your own.