Most people's first reaction to a letter from the Inland Revenue Department is to put it somewhere safe and think about it later. That is the one thing not to do. An enquiry letter is usually routine, and it is almost always easier to deal with in the first week than in the last.
What an enquiry letter is
After a return is filed, an assessor may want to understand a figure in it: a large expense, a drop in profit, a payment to a director, income that looks as if it belongs somewhere else. The letter lists the questions and the documents they want to see, and gives a date for the reply. It is not an accusation. It is a request for an explanation.
The first week
- Read the whole letter and note the reply date. It is printed on the letter; it is not the same for every case.
- Send me a copy the day it arrives, with the tax return it refers to.
- Collect what the letter asks for — invoices, contracts, bank statements — and nothing else yet.
- If the date is too close, ask for more time in writing, before the date passes, and say why. Reasonable requests are usually granted.
Answering it
Answer the questions that were asked, completely and accurately, with the documents that support the answer. A short, well-supported reply closes most enquiries. A long reply that volunteers guesses tends to open new ones. Keep a copy of everything you send and a note of the date it went.
Why not to ignore it
If no reply arrives, the assessor can proceed on the information they have, which is rarely in your favour. An estimated assessment still has to be paid, or formally objected to within the time allowed, and unanswered letters make the next one more searching.
When it is more than a letter
A field audit, where officers visit and examine the books, or a case taken up by the Department's investigation side, is a different matter. It can reach back over several years and involves meetings, interviews and negotiation. If the letter mentions either, call me before you reply to anything.
General information, not advice on your own position. Every case turns on its own facts.