Cash flow statement
May 6, 2010 | 20,00 EUR | answered by Dr. Dr. Danjel-Philippe Newerla
My friend is self-employed and business has not been going well for about five years. At the end of the year, he is usually at breakeven or in the loss zone. During this whole time, he has managed to keep his business afloat. His personal lifestyle has been very modest so far, with most of the expenses being covered by others (waiving maintenance from me, food from Mom, etc.). Now, the situation has changed after a long illness. Since last year, he has increased his prices and consistently reduced expenses. He can now buy his own food again and entertain his children occasionally. Last week, he received the income tax assessment for the year 2008, with a request to submit a cash flow statement for 2009 and explain how he supports his life. All these private donations are not documented. He is now afraid that he may have somehow violated the law. Should he expect an audit for the previous years? 2009 was the first year in a long time where a small profit was made and some money was left over. What consequences should be expected and how should he proceed now?
Dear inquirer,
Thank you once again for your inquiry! Below, I would like to respond to your inquiry, taking into account the contract you provided for examination:
First, the presentation of a cash flow statement may not initially cause concern, as long as it can be proven that the income was received beforehand. If the income consistently remained at 0 and yet a (albeit modest) standard of living without the assistance of state funds (unemployment benefits 1 or 2) was possible, the tax office naturally wonders where this money came from.
This would need to be proven. For the waiver of maintenance and for the private donations, this can also be retrospectively confirmed by the relevant individuals.
Experience shows that a cash flow statement often leads to an audit, so I would strongly advise your friend to engage a local tax advisor as soon as possible to represent his legal interests, as he will hardly be able to avoid the need for a tax advisor in the event of an audit.
I hope that my explanations have helped you. Please feel free to contact me via my email address or the follow-up option.
I wish you a pleasant Thursday afternoon!
Kind regards from the North Sea coast,
Dipl.-Jur. Danjel-Philippe Newerla, Attorney
Heilsbergerstr. 16
27580 Bremerhaven
kanzlei.newerla@web.de
Tel. 0471/3088132
Fax. 0471/57774
