The mere mention of Revenue Audits is often enough to make most wake up in cold sweats in the middle of the night. Why did they pick me?, What did I do wrong?, How much will I owe?
Who is Selected?
Although some Revenue Audits are still random, the majority are now based on a Risk Evaluation Analysis and Profiling (REAP) system. It allows Revenue to analyse data across individuals, companies, business and sectors, identifying inconsistencies. In addition Revenue often targets specific sectors, at present construction is coming back under review.
These are not Revenue Audits and happen very frequently to allow Revenue to try explaining inconsistencies without the need for a full audit. Take these seriously as there is a reason Revenue has selected you. In absence of proper response it is likely to lead to a full audit.
Essentially if you are fully compliant you have nothing to worry about but be careful. Although revenue audits are for specific periods they can be extended. Do a review of information prior to the audit and if necessary make a voluntary disclosure of any errors at the start of audit.
NB: Penalties and interest will be applied to any underpayment of tax. Penalties are much higher when errors are not disclosed.
Filing tax returns on time consistently reduces Risk so stay compliant even when you cannot pay liabilities.