audit wages query

Aaron Rodgers

I've an audit at the moment. I've an employee whom I paid in cash. he was wary of capital controls. anyway all deductions were made at source and paid to revenue. his wages were withdrawn from my account and physically handed over. payslips were provided and otw 1 forms were provided to revenue.
unfortunately the auditor is looking for a paper trail which cannot be provided as the employee didn't lodge the money to a bank account. However, the employee has signed paperwork from revenue confirming he received the wages and is prepared to draft a separate letter to that effect.

What other evidence could the revenue possibly expect? I'm at a loss and there's no funny business going on..utterly frustrating..

Fishyfreak

Sounds like you've already provided a paper trail.

If you paid him by cheque/eft, you would have the cashing of the payment on your bank statement instead of a cash withdrawal.

Did you withdraw the exact amount from your bank account (i.e including cent) or was it an ATM withdrawal. Maybe it's the difference between the withdrawal amount and the payslip net pay amount that is the problem.

Also if there are numerous cash withdrawals on the account maybe the auditor is wary that there was a certain amount of legit payments and a few cash in hand ones?

Aaron Rodgers

I would have withdrawn a few lump sums and doled them out to my employee on a weekly basis. those withdrawals match the net wages paid.

FC1

Do you run a cash business? If so they may be thinking there is cash kept of the books or he could have been paid more than was declared on revenue returns.

Best in future not to pay by cash. The situation can arise where you hand over your employee €500 cash. The next day he could come back to you and say he never received his wages. Its your word against his. If he wants to work for you he has to be prepared for his wages to be transferred to his bank account. Hopefully the revenue will be satisfied with what has been supplied to them.

viztopia

Aaron Rodgers wrote: »

I've an audit at the moment. I've an employee whom I paid in cash. he was wary of capital controls. anyway all deductions were made at source and paid to revenue. his wages were withdrawn from my account and physically handed over. payslips were provided and otw 1 forms were provided to revenue.
unfortunately the auditor is looking for a paper trail which cannot be provided as the employee didn't lodge the money to a bank account. However, the employee has signed paperwork from revenue confirming he received the wages and is prepared to draft a separate letter to that effect.

What other evidence could the revenue possibly expect? I'm at a loss and there's no funny business going on..utterly frustrating..

Is it a revenue auditor or your annual auditor?
If it is the annual auditor then politely tell him to feck off. You have provided him with more than enough information. Remember cash is legal tender and there are no issues paying wages with it as long as proper records kept. It may be a case of a junior on the audit making a mountain out of a molehill. Note I am an auditor myself.

Aaron Rodgers

Unfortunately it's a full revenue audit. I've a cash business but there's no issues with anything else. Just this.

As has been said, cash is legal tender. The wages are 32800 gross. Instead of going up to the bank and withdrawing 500 odd per week I would go up and get a few lump sums during the year in advance and dole it out each week. I know it sounds ridiculous but it's true.

viztopia

Aaron Rodgers wrote: »

Unfortunately it's a full revenue audit. I've a cash business but there's no issues with anything else. Just this.

As has been said, cash is legal tender. The wages are 32800 gross. Instead of going up to the bank and withdrawing 500 odd per week I would go up and get a few lump sums during the year in advance and dole it out each week. I know it sounds ridiculous but it's true.

Do you have an accountant acting for you? If so what does he say? If not I am not suggesting you get one as it would look bad at this stage .
The salary that your employee is on does look a little suspicious tbh as its right up to the standard rate of cut off. Again nothing against that but it's a coincidence. What stage is the audit at? Is he still with you or is he finished the field work? Is this the only issue? Can you Provide proof that the employee actually worked for you such as signed delivery dockets during the year.

barneystinson

Aaron Rodgers wrote: »

Unfortunately it's a full revenue audit. I've a cash business but there's no issues with anything else. Just this.

As has been said, cash is legal tender. The wages are 32800 gross. Instead of going up to the bank and withdrawing 500 odd per week I would go up and get a few lump sums during the year in advance and dole it out each week. I know it sounds ridiculous but it's true.

So let me get this straight...

You run a cash business.
You presumably lodge money weekly (or more frequently).
Then, every few weeks you make a big cash withdrawal to cover several weeks' wages.
Why don't you just pay the cash wages out of each week's cash takings??
It sounds literally incredible, and based on your previous posts a few months ago you've probably already got a credibility deficit to overcome with the auditor.

Aaron Rodgers

barneystinson wrote: »

So let me get this straight...

You run a cash business.
You presumably lodge money weekly (or more frequently).
Then, every few weeks you make a big cash withdrawal to cover several weeks' wages.
Why don't you just pay the cash wages out of each week's cash takings??
It sounds literally incredible, and based on your previous posts a few months ago you've probably already got a credibility deficit to overcome with the auditor.

Cash is lodged monthly. Wages were withdrawn. I thought it'd look better withdrawing wages specifically from the account and lodging cash separately, rather than swapping them around without it on bank statements. I wouldn't take in 30k in cash a year anyway.

Re the other issue, I paid that. Prompted voluntary disclosure. Don't see how it affects my credibility? Credibility's not something tangible that can be measured. I do have an accountant. He's good. Just picking brains.

As I've said already the facts of the thing are as follows,
Guy worked for me, paid in cash by withdrawals from account, all deductions were made so the correct net was issued. Net paid is confirmed by employee and tally's with withdrawals from bank account. Even if the revenue auditor doesn't find it credible surely I'm innocent till proven guilty. He's zero evidence I believe bar the strangeness of it.

barneystinson

Aaron Rodgers wrote: »

Cash is lodged monthly. Wages were withdrawn. I thought it'd look better withdrawing wages specifically from the account and lodging cash separately, rather than swapping them around without it on bank statements. I wouldn't take in 30k in cash a year anyway.

Re the other issue, I paid that. Prompted voluntary disclosure. Don't see how it affects my credibility? Credibility's not something tangible that can be measured. I do have an accountant. He's good. Just picking brains.

As I've said already the facts of the thing are as follows,
Guy worked for me, paid in cash by withdrawals from account, all deductions were made so the correct net was issued. Net paid is confirmed by employee and tally's with withdrawals from bank account. Even if the revenue auditor doesn't find it credible surely I'm innocent till proven guilty. He's zero evidence I believe bar the strangeness of it.

Re credibility, you had a completely fictitious expense in your accounts / tax return. Presumably the double entry was along the lines of Debit Expense / Credit Cash (or Drawings)...

Now you have a very unusual arrangement for the payment of wages, in circumstances where the above has already been established.

To any prudent auditor you have a deficit of credibility to overcome.

Do you have any other staff? How are they paid, and are they on a similar rate to the guy getting cash?

The best evidence you could offer to support the historic arrangement is that you immediately start paying these wages by EFT to the employee's bank account.

As previously mentioned, leaving aside the tax issue, you're also exposed to the employee coming along at some point and saying they haven't been paid / paid in full.