What To Do When You Get Audited – A limited liability company is a preferred form of business structure in Singapore. It offers benefits such as limited liability, tax savings and light compliance obligations. Singapore’s Companies Act recently introduced the concept of a “small company” that exempts limited liability companies that meet certain criteria from the requirement of an annual audit. This helps the company reduce compliance costs as well as the overall regulatory burden. This article explains the audit requirements of a Singapore limited company.
The Companies (Amendment) Act 2014 revised Singapore’s audit exemption criteria and introduced the concept of “small companies”. The concept of small business applies to existing as well as newly incorporated limited companies in Singapore. This article explains the concept of small business audit exemption and the criteria for exempting a business from the need to audit annual reports.
What To Do When You Get Audited
Singapore’s Companies Act requires that every company’s financial statements and accounting records be audited annually by an auditor unless the company meets Singapore’s audit exemption requirements.
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In 2014, the Companies Act was amended to update the criteria for exemption from company audit and introduce the concept of “small company”. A company classified as a small company is not required to appoint an auditor and audit its accounts. The amended law entered into force on July 1, 2015. A business is considered a small business if it meets at least two of the following three conditions:
In addition to sole proprietorships, group companies (holding companies and subsidiaries) may benefit from the Singapore audit exemption if they qualify as a small group according to the criteria described below.
A group company is defined as a holding company and its subsidiaries that form a group based on a common source of control.
A group company is exempt from the audit of annual accounts if the holding company and all subsidiaries separately:
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To qualify as a “small group”, a group (consisting of all companies) must meet two of the following three conditions in the previous two financial years:
In other words, this means that the individual subsidiaries as well as the holding company as a group must meet the qualifying criteria for a small company to meet the audit cost criteria.
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If a company is granted the status of “small company”, it enjoys the benefits of the audit exemption, unless the company is disqualified. A company will be disqualified if the company:
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Prior to the 2014 Amendment Act, exempted private company accounts with an annual turnover of S$5 million or less were exempted from audit. An exempt private company is a company with fewer than 20 shareholders and no corporate shareholders.
After the 2014 amendments, the criteria have changed. Any business defined as a “small business” will now qualify for an audit exemption.
If my company is exempt from audit, do I still have to prepare and file annual reports?
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Yes, you still need to prepare and file an unaudited annual financial statement. Among other things, your company’s annual reports are the main basis for calculating and preparing your company’s tax returns. The only difference is that if your company is exempt from audit, you do not need to appoint an audit firm and formally audit the accounts.
My company is classified as a small business and therefore exempt from audit requirements. Can you handle my company’s accounting and tax returns?
Regardless of whether your company is audit exempt, we offer a full range of accounting and bookkeeping services in Singapore. If an audit is required, we work with a designated audit firm to complete the audit efficiently and stress-free. If you need help or need to register a company in Singapore, contact us today.
Transitional Provisions A company established before the changes to the Act can also use the audit exemption if the company meets two of the three qualifying criteria for a small business. In particular, a business registered before 1 July 2015 if: it is a sole proprietorship and meets the qualifying criteria in the first or second financial year after the start of the small business criteria (ie on 1 July 2015); this table explains the transition rules:
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A business is a small business because the business meets the criteria in the first year after the concept is implemented
The company does not meet the eligibility criteria in FY15 but does in FY16
A business is a small business because the business meets the criteria in the second year after the implementation of the concept
Does not qualify as a small business because the business does not meet the criteria in the first and second year after concept implementation.
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Changes to the audit exemption criteria further ease compliance obligations for small businesses. Many companies that meet the definition of a “small company,” including subsidiaries of foreign companies, do not qualify for audit exemptions. Singapore is a very attractive choice for setting up your business base. The country promotes one of the best business policies in the world, making it easy for your business to take root and flourish. It’s a world-class economy full of opportunities for people with innovative ideas and the drive to build successful businesses.
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What To Do When You Receive An Irs Audit Letter
This article is for informational purposes only. This content does not constitute legal advice, is the opinion of the author, and has not been evaluated for accuracy or changes in the law.
There’s no guaranteed way to avoid an audit, but there are precautions you can take to help your business avoid red flags.
Until recently, the chances of your small business tax return being audited were low. Bloomberg cited IRS data showing that only 140 small businesses out of 4 million were audited in 2018. For S corporations, the numbers were slightly higher, but still less than 0.5%.
But in late 2020, the IRS announced that the agency will add auditors to increase audits by 50%.
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Reporting net annual expenses, especially small expenses, can fall under the IRS’s radar. The IRS may consider the loss to be indicative of unreported income, prompting a full review of your returns.
“When the IRS sees a net loss in a business, it’s convenient to conduct an audit,” says Steven John Kaplan, CEO of True Contrarian Investments, LLC. He adds, “You have to report all your income, but you don’t have to report all your expenses, so leave some expenses if they make a small net profit during the year.”
While you should always report 100% of your income, you can avoid overreporting by reducing the number of deductions you claim. For example, writing off rent, car expenses, mileage and technology can save you money, but if the numbers are higher than you earned, they could lead to an IRS audit.
Reporting your business expenses demonstrates transparency and prevents the IRS from questioning the information you provide. Incorrect information about business expenses can lead the IRS to believe that there is a problem or that you are intentionally misrepresenting your income.
If You Get Audited By The Irs, What Happens?
“If you have a choice between lumping certain expenses into a general category or listing them under ‘other expenses,’ it’s always preferable to list them directly,” advises Kaplan. “The IRS may think you’re trying to fill in non-existent expenses by bundling advertising or travel instead of itemizing specific advertising or travel expenses.”
Instead of assuming that a potential auditor will understand why your travel expenses suddenly dropped by 100% in the last year or why your internet advertising costs increased by 300%, fill out additional documents to explain in detail what happened and attach them to your return when they do. you file.
So, when your return is marked and you appear in front of the person, you have answered a lot of questions
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