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Saturday, Sep. 15, 2012
Bone up on your tax audit ninjutsu to fight back
By AMY CHAVEZ
Our island of 602 people has a PA system that is used to make important public announcements. While these announcements usually concern typhoon warnings, ferry cancellations and funeral announcements, the PA system is not limited to these. Temple ceremonies are announced too, such as Buddha's birthday and the anniversary of his passing into Nirvana.
But last week for the first time ever, I heard a very unusual announcement.
"Shiraishi Island residents, may I have your attention please. Two men in suits are driving around the island in a car and knocking on doors. We consider this shady activity. Know your rights as a citizen and do not let them inside your house."
Indeed, a suspicious gray car had been driving around the island all day. Being that our island only has one road 6 km long, most people who do drive it do so quickly because they know exactly where they are going — straight! But this car crept along very slowly looking like a large, elderly, gray bug.
By now, the entire island was in a panic. Many had already let the men in black suits inside after which the men carried away important documents. "Nothing like this has ever happened on this island before," said one of the long-time business owners on the beach.
Unfortunately, by the time I heard the announcement, I had let the men into my house, too. They arrived at my door and, like police officers, flipped open official-looking certificates showing that they were from the tax office. I then asked for their business cards, which they gave me. One man was from the city tax office and the other was from the prefectural tax office.
"We're here to do a tax audit for the years 2009 to 2011," they announced.
I invited them inside and they sat down on the sofa. After all, I have nothing to hide. I pay my taxes every year and abide by the tax laws. The only reason they should be here at all is to return some of the money they've grazed from my salary and used to fund dubious projects involving concrete. One thing I was sure of was that there was no way in hell I could owe any taxes.
"Can we take off our jackets?" they asked. I thought this was a very dumb question (do I look like their mother?), but I said yes.
They told me to explain my job, so I did, briefly. I also produced three files, one for each tax year in question. These files had my tax statements and supporting documentation inside.
They picked up one of the sheets of paper labeled "other income" that had itemized amounts I had been paid for book royalties and writing projects. May we take a copy of this receipt? They asked. "Sure, but it's already accounted for on my tax return," I said. At this point I was getting suspicious. Why were they always asking me questions? And how in the heck were they going to copy this piece of paper?
"I have a portable copier!" said the man and he went outside to retrieve it from the elderly gray bug. Who knows what else was inside that car. Perhaps a portable jail cell?
The man came back into the house, struggling with a cumbersome — but, um, portable — copy machine. "Can I borrow your electrical outlet?" he asked. Do you think I can write off his electricity usage on my taxes for this year?
A few minutes later I got a phone call from another islander. "I heard that the men are inside your house right now. Tell them to leave immediately. I'm very serious."
I told the men that something had suddenly come up and that I needed to go attend to it. The men said OK, finished their copying and started to leave.
"This is all very strange," I told them in my concluding comments. "I would think you'd make an appointment before you came." They agreed that they should make an appointment, so they did. They would come again next Thursday.
That night there was an emergency meeting at the local bar for all the business owners on the island.
Someone had acted swiftly and called in representatives from the local Small Business Association. In this informal meeting they taught us about our rights concerning the tax office. "They are not allowed inside your house. Nor can they take anything out of your house or copy any documents," they said. "Unless they get your permission, of course."
We all groaned as we realized that what we had mistaken for politeness was really a clever prying into our affairs. When the tax man says, "May we take off our jackets?" or "May we take a copy of this?" he is asking for permission because he must have it in order to perform that action. If you say no, he cannot legally carry out the action at that time.
The Small Business Association explained that this type of tax investigation is called "nin'i chosa," and while we have to cooperate with the tax men, it is to be done at our convenience, not theirs.
They cannot just show up at your door and expect you to drop everything to answer their questions. The reason they do this is to try to catch you off-guard. They will try to deceive you, or coerce you into saying something you shouldn't. They will try to surprise you with questions and demand point-blank answers. But you have the right to take time to think about the answers or consult someone if necessary.
And starting in 2013, new laws will come into effect so that the tax men will have to present a paper in advance informing you of why you are being audited and what will be covered in it along with the date of the audit.
The men from the Small Business Association then passed out booklets that explained exactly what the tax men can and cannot do. It lists all your legal rights (with drawings!), everything from your right to privacy to your right to refuse people entry into your home.
Until then, they said, every time the tax man asks for permission to do something, ask them why they need to do it. If you feel they are violating your rights, you may tell them to stop the audit at that moment and reschedule to finish it at a later date. You have the right to stop the audit process if you feel overwhelmed or if you don't know the proper answers.
They recommend having someone else in the room with you during the audit (for blue form tax filers). They encourage people to demand to know reasons for absolutely everything and to never use your inkan stamp unless you know exactly what you're signing for.
The tax men may be intimidating but you can be, too. Stand up for your rights. Know your tax audit ninjutsu and use it to fight back.
Follow Amy Chavez on Twitter @JapanLite.