What is fiscal discrepancy for natural persons?
Fiscal discrepancy arises when a fiscal authority carries out a verification that expenses (expenditures) of one year exceed the declared income, that is, the existence of an economic difference superior to the declared income.
Article 91 of the Income Tax Law (LISR) establishes the process of fiscal discrepancy used by an authority to verify the amount of expenditures in a year.
Phases to determine a fiscal discrepancy
The Tax Administration Service (SAT) detects that the amount of expenditures is superior to the declared income in a year, and notifies its producer about a fiscal discrepancy.
The notified document should show:
- The amount of detected expenditures
- The information used
- The means by which it was obtained
- How the discrepancy was determined
Expenditures are determined by considering:
- Purchases
- Deposits in bank accounts
- Financial investments
- Purchases made with credit cards
Based on the aforesaid, all expenses made are taken into account. Registration at the Federal Taxpayer Registry is also considered to learn if declarations are not presented, or if, in the declarations, income is less than the expenses.
When income does not correspond with what is paid as Income Tax (ISR), all available information on the natural person can be used, such as records, declarations, and third-party information, so as to learn the amount that should be actually paid.
Once notified, 20 days are allowed to present a report that explains where are the exceeding resources obtained from. It is recommended to provide all necessary evidence that demonstrates the tax payment made. In case this is unviable, the owed Income Tax should be paid, in addition to a penalty fee. However, there are cases in which the natural person is accused of tax fraud and may consequently be imprisoned for months or years.
The best way to avoid fiscal discrepancy is to declare all income received. This way, in case of being investigated by the Tax Administration Service (SAT), all necessary documentation will be available to ascertain where that income is obtained from.
In case both Income Tax and a penalty fee have to be paid, it is important to be able to verify the origin of the fiscal discrepancy. In QuAdrans Law and Finance, you will be able to resort to a certified accountant to orientate you through this accounting process.
