Is your business under a Texas tax audit?
Being notified and going through the procedure of a Texas tax audit can be a daunting proposition. The process begins with your receipt of Notice of Intent to Audit Books and Records, from the Texas Comptroller. The auditor will be looking for violations of Texas tax law and whether additional taxes, along with penalties and interest, can be assessed against you. You should understand from the start that a Texas auditor’s job is NOT to help you accurately determine your tax liabilities. THE AUDITOR’S JOB IS TO FIND ADDITIONAL TAXES DUE. It is that simple. If the auditor can call into question an entry or record, then the auditor will do so – and usually project that one record across the entire 3 year audit period exponentially increasing your proposed Texas tax assessment.
Particularly with a business, the State will look for instances where your business has collected sales tax from customers but failed to remit all or part of these monies to the state. Collecting but not remitted Texas taxes (think Sales Tax or Unemployment Tax) is one of the worst possible things a business owner can do with regard to Texas taxes. If you consider penalties and interest to be painful, then you might be surprised to find out that collecting but not remitting taxes can land a business owner in jail. Under Texas law, collecting but not remitting these “trust fund taxes” is considered stealing from the state and the business owner and employees can be charged with as high as a felony under certain circumstances.
Even if you feel you have been compliant, we strongly recommend that you do not represent yourself during as Texas tax audit. The Texas auditors have many tricks up their sleeves that can limit your rights under Texas law. It is vital to have a knowledgeable and experienced tax professional to assist you through all stages of the audit, from the initial notice through to its conclusion.
Texas Tax Audit Protection
The State will ask to either do a “Desk Audit” in one of their offices or a “Field Audit” at your place of business. You should consider saying “NO” to either request, or better yet – let us say no for you. Do not let an auditor into your business; make the auditor come to your tax professional’s office. We know how to “control” the audit, so the auditor does not go on a “fishing expedition” (looking for ways to accuse your business of under paying taxes). These are commonly the types of Texas taxes that are audited, corporate income tax and others can come under State review. All auditors request certain records and ask questions regarding your business and accounting methods. Often the auditor will ask for things that (s)he has no right to demand or will ask the taxpayer to sign documents that the taxpayer does not have to sign. We know the games the Texas auditors play and how to defend against them.
The State auditor has the authority to assess additional taxes plus penalties and interest. They can also give your case over to the criminal investigation division. Texas auditors may be highly trained in tax law, but they have been taught to constantly suspect you are underpaying tax and ways to prove it. Don’t you want your tax professional to have greater knowledge and experience than the auditors, who are coming to your business to LOOK for ways to accuse you business of underpaying Texas taxes?
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