Tax Investigation Techniques
There are two kinds of tax inspection techniques that are widely used by various countries, namely Net worth method and expenditure method.
NET WORTH METHOD
This method is an indirect method. The formula of this method uses the entire income tax payers as a means of proof. The formula of this method can be described as follows.
Suppose that net worth in the first year is X, then the net worth in the year X is the entire assets minus debts. The same is done for the second year. Further net worth the first year compared to the second year. This comparison will result in an increase in net worth, which should be equal to the taxable income for the second year. See examples of the following calculation:
First Year
Assets 1. 000
Liabilities 200
Net worth 800
Second year
Assets 3000
liabilities 250
net worth 2750
net worth first year 800
net worth increase in 1950
plus nondeductible ekspenses 1000
minus nontaxable income 400
Taxable income corrected 2550
Taxable income reduced corrected 1250
Taxable unreported income in 1300
EXPENDITURE METHOD
as well as net worth method, expenditure method is also used to determine taxable income not reported. See examples of the following calculation:
Expenditure 10.000
Total Nontaxable income 750
Adjusted Gross Income 9.250
Minus standard deduction 750
Minus exemptions 500
Corrected taxable income 8.000
Reported taxable income 3.000
Unreported taxable income 5.000
Expenditure method is usually used for tax cases:
1. Taxpayers did not make the accounting
2. Taxpayers making bookkeeping but not perfect
3. Hide taxpayer accounts.
4. Taxpayers have no visible assets
author :theodorus
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