“Why me?!” is a typical response when people get the notice of audit. Here are the top reasons you are getting audited.
1. The taxing authority issued you a bill as a result of a prior audit.
If your company has been audited and a deficiency (usually $10,000 or more in Texas) was assessed, you can count on another audit in 3-4 years. Be sure to fix any mistakes identified by the auditor during the sales tax audit immediately. They will be scrutinized in the next audit. Also, prospectively look for additional areas of non-compliance that may not have been identified by the auditor.
2. A customer’s audit led them to your door.
You may be audited because an auditor turned in an audit lead when it was noted that an invoice issued by your company did not reflect the correct levy of sales tax. In the course of auditing a client of your company, it is common practice to note when a vendor doesn’t charge appropriate sales tax and turn in that vendor for audit.
3. Someone turned your name in for audit, i.e snitched!
You can be turned in for audit by a third party or auditor. Years ago, I attended a sales tax conference and listened as a state employee explained that she generated audits by riding in the city and noting the names of contractors on signage. She scheduled these contractors for audit.
4. Your industry is routinely audited because it is a gold mine.
There are times when companies in selected industries are selected for audit.
5. Random selection.
Your number may just come up!
The truth is it doesn’t really matter why you were selected for audit. You are being audited. Get with it! Start planning how you are going to address the routine audit as quickly as possible.
Need help? Contact us for a free 30-minute consultation where we can discuss ways we may be able to help represent you durring this process.