Insurance covers a wide variety of risk niches. One of those niches is tax investigation insurance. That is, you get covered for any costs that you may have to pay to an accounting firm should you have to undertake an audit or an investigation. Although it’s not as common as other mainstream insurance products, tax investigation insurance is vital for large businesses for a number of reasons. Read all about them below.
Tax audits are unavoidable
When a business reaches a certain stature, its tax and accounting needs grow immensely. They become a key part of running the business. When this happens, tax audits are unavoidable. Tax and accounting investigations are also warranted by the government and other bodies from time to time. Due to these reasons, tax and accounting audits will be required regularly just to ensure that the company is in full compliance with the law and that its financial records are in proper order. Having an insurance cover for such an occurrence is, therefore, prudent for any large business. After all, you know that you’ll have to meet the associated costs sooner or later.
Tax audits are expensive
For small businesses, accounting and tax are not big issues. The scale of operations allows the business owner or a single outsourced accountant to cover all the needed work with relative ease and over a short period of time. For large businesses, the scene is completely different. A barrage of tax accountants is needed every time and sometimes they may be retained full time. A tax investigation or audit is, therefore, a big cost for large businesses, especially when the said audit has to cover several years of past operations Having a tax investigation insurance cover, therefore, allows large businesses to save on these costs.
It’s good for business
A tax investigation by the CRA or any other regulatory body in the country should be treated as a risk because it’s unwanted, costs a lot of money, and draws negative PR to your business. The best thing you can do is to shield yourself from this risk by having a tax investigation insurance cover in place. Although this cover will not make such investigations go away, it will make your firm, your clients, and your business partners feel a little at ease. That’s because such a cover assures everyone that you have taken all the measures needed to avert an accounting dilemma. Also, such a cover means that money is not an issue should such an audit or investigation be ordered.
A tax investigation can sink your business
Last but not least, tax investigation insurance is vital because tax audits and investigations can sink a business if not handled well. Tax or accounting inconsistencies after an enquiry or audit can lead to legal charges, private lawsuits, and negative PR in general. These are risks that can sink any type of business, no matter how large it is. An insurance cover does not guarantee that you’ll get off easy. However, it does guarantee that you can afford the very best professional help when such a situation occurs. And that can mean all the difference when you are faced with a tax investigation.