According to the Tax Administration Service (SAT), ‘’natural persons will be subject to an audit when their expenses in a given fiscal year do not match what has been declared or, rather, should have been declared in their tax returns.’’ In other words, taxpayers are investigated when tax discrepancies are identified.
Also read: The importance of the fiscal code for the country’s economic activity.
What is the penalty for income tax discrepancies?
SAT defines tax discrepancies as any expenses or investments whose value is greater than that mentioned in a taxpayer’s tax returns. In some cases, taxpayers decide not to submit their tax declarations altogether. But that, under no circumstances, should ever be done.
Taxpayers are notified of any discrepancies as soon as they are identified, and are given 20 working days to clarify the origin or nature of the unreported income.
When SAT detects that a taxpayer’s income and tax returns do not match, it audits the individual (by reviewing their record, past tax declarations, and third-party references) to determine the amount owed. The taxpayer will then have twenty days to make an appeal and provide proof of payment.
If the information is not turned in during that twenty-day period, the taxpayer will then have to pay both the amount owed and an underpayment penalty. Authorities might even charge the person with evading taxes, a serious crime that could lead to a three-month to nine-year prison sentence. Not filing a counter-report would be enough for that to be the case.
You might also be interested in our video: How to submit an annual tax declaration.
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