Category Archives: Financial Services

Understanding How Tax Investigation Insurance Works & How It Can Help Your Company

Tax investigation insurance is one of the newer risk products in the market that every business and organization should be considering taking up. As the name suggests, it’s all about taking up an insurance cover that safeguards your business against risks associated with tax investigations. This includes tax audits, tax probes, tax enquiries and any other processes along that line. Below, find out what tax investigation insurance is all about, how it works, and how you can get it.

Sourcing an insurance provider

Like with any other insurance product, tax investigation insurance starts with you searching for a credible provider in the market. Due to its nature, this form of insurance is not offered by all insurance companies. In fact, most general insurance companies do not provide it in most cases. Being a highly specialized insurance product, it is only offered by certain firms that mostly deal with accounting insurance and tax related risks. You can search online for a provider or you can make inquiries from tax and accounting firms/organizations.

Securing a cover

There are two ways to acquire a tax investigation insurance cover. One, you can seek a direct over where your company gets insured against the risk. In case you need to tax investigative services, the insurer will compensate you for incurred costs or pay the affiliated company directly. Alternatively, you can get the same benefits by working with a tax accounting firm that has the same form of insurance cover. You don’t get to pay any premiums and instead, you enjoy the cover taken up by the firm you’re seeking services from. That is, their insurer pays them for your costs.

Claiming your cover

Once you have secured a tax investigation insurance cover you can redeem it any time you are engrossed in a tax audit, a tax investigation, and accounting enquiry or even a tax filing. As a business, all you have to do is make a claim and your insurer will make the agreed payment percentage on your behalf. For accounting services providers, they get paid any time they provide the service to their clients; that is as opposed to their clients paying them directly.

Benefits of tax investigative insurance

If you are mulling whether to take up tax investigation insurance or not, this part of the article will explain to you exactly why you should.

  1. Avoid payment conflicts with clients

For companies that provide tax accounting services to others, this type of cover allows them to receive payment promptly and directly from the insurance company. This sort of arrangement conveniently eliminates payment conflicts between the company and its clients.

  1. Save on audit costs

For client companies that are seeking the tax audit services, this type of insurance cover helps them to save on costs. Tax audits and tax investigations can cost a lot of money. However, with this cover in place, such companies can get full compensation by just paying thy agreed upon premiums.

  1. Secure the best accountancy possible during investigation

Lastly, a tax investigation insurance policy allows client companies to enjoy the best professional tax/accounting services in the industry without having to worry about the cost factor.

4 Reasons Why Every Large Business Should Have Tax Investigation Insurance

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.