Automated audit: how the STS finds discrepancies in sole proprietor (FOP) reports

The main analysis tool is the automatic cross-checking of the sole proprietor’s (FOP’s) reports with those filed by business partners (via form 4DF or other reports), bank statements, cash discipline, and results of fact-based audits. The State Tax Service analysis module enables the detection of:

• mismatches in totals in declarations and 4DF reports from contractors;
• discrepancies in dates or amounts credited to accounts vs those declared as income;
• other gaps between data provided to various authorities.

Typical “discrepancies” that trigger the system:

• The counterparty reports payments to an individual entrepreneur that the FOP doesn’t show in their own tax report;
• Money received into a bank account but not declared as income (especially for the general tax regime);
• The FOP reported income in a period other than the actual receipt date;
• The e-cabinet reveals non-conformities with bank accounts, foreign currency receipts, exchange differences.

What happens next: the tax office’s algorithm

1. Desk audit— automatic analysis of reports, simultaneously checking counterparty and bank payment info (up to 3 years or 1095 days);
2. Sending a request/letter to explain discrepancies— if discrepancies aren’t self-corrected, the tax office asks for clarifications, documents, bank statements;
3. Documentary or actual audit— if answers are unconvincing or gross violations found (no explanation, suspected schemes), the STS initiates a full audit;
4. Additional assessments and penalties— violations lead to back taxes, social contributions, military tax, fines, and interest.

Court practice: Who is liable for discrepancies?
Modern case law shows that the argument “bank revenues aren’t yet income” works only if backed by appropriate evidence. The Supreme Court consistently emphasizes: if an entrepreneur fails to rebut (does not provide supporting documents), any discrepancy or retention of funds may become grounds for additional tax assessment.
Very often, tax agents exploit the fact that an FOP does not keep careful records of dates, reconciles incoming periods poorly, or delays supplying primary documents, conducts barter deals without reflection in reports, or forgets informal income streams.

Practical tips: How to avoid “discrepancy” traps

• Do a self-audit at least quarterly: reconcile income declared with bank statements and contractors’ 4DF forms;
• Don’t postpone fixing small errors — better to file an amended return before an audit begins;
• Keep all agreements, invoices, primary documents, specifications, particularly for fact-based audits;
• Avoid “grey” cash circulation or movements via third-party accounts — banks also signal unusual transactions to the tax office.

Specific risk — counterparty “errors”
The automated 4DF and banking data exchange means FOPs must verify not only their own but also “foreign” reporting. Typical situations:

• The counterparty reports excess/insufficient payments or makes mistakes in amounts or periods — connect and ensure corrections prior to filing a return;
• If the error isn’t corrected before a desk audit, provide a convincing written explanation and supporting documentation to the STS.

Control in IT, services, and online trade
In 2025, special attention is paid here: digital platforms and payment systems send information about accounts and receipts to the tax office, and lack of explanation is seen as evasion — especially when it comes to mismatches in currency receipts, VAT on cross-border services, and IT or marketing company relationships.

What FOPs/sole proprietors on the unified/general tax system should do

• Single tax regime: show all income received, even if some was credited by mistake or is to be returned;
• General system: account for income/expenses on a cash basis (what was received is reported), but with precise proof of funds’ origin.

Liability for inaccurate reporting — what to expect
As a result of audits, most common consequences:

• additional personal income tax, social contributions, fines of 25–50% of the violation sum;
• account freezes or tax liens for evasion;
• investigations of “fictitious” contracts (especially with significant unexplained sums);
• legal disputes about income/expense recognition period or error correction order.

Conclusions: Main points for FOP protection
Diligence about discrepancies, reconciliation with contractors, and transparent reporting are key to FOP safety. Exit traps via timely error correction, documentation of every step, and regular communication with accountants and lawyers. Updating the FOP’s e-profile and reviewing reports must become routine at least quarterly.

Author -Julia Popadin, attorney at the Tax and Customs Law Practice,  WINNER Law Firm.
If you have any questions or issues related to tax inquiries, contesting decisions, or need protection during audits—contact WINNER Law Firm specialists for consultation and support.