Facing a state income tax audit?
Receiving a notice for a tax audit is never good news for most taxpayers, in fact, for some taxpayers, it can be a huge cause for concern. A major concern will be the question of why a tax audit notice has been sent and what they could have done to trigger it. Additionally, the question of how to begin to prepare for it also often arises as well.
This question leaves the taxpayer worried, trying to understand what led to the need for a tax audit in the first place, and then the possible end result of such an audit. Next comes the financial stress of getting legal and financial representation, and then, the possible legal implications of defending such a tax audit. Most times, it is a lot to take in; however, when a notice for a tax audit is received, it is in the best interest of the taxpayer to find out what to do next and to do it fast.
Why have I received a Tax audit notice?
A notice for a state income tax audit is no reason to panic yet, this is because various situations can lead to a state income tax audit for different individuals. Some taxpayers are audited based on a random selection by the state tax office for audit and not necessarily because of any suspicion on their filed tax returns. However, for many taxpayers, the need for a state income audit is usually necessitated by a suspicion of tax fraud, alongside inadequacies, irregularities, and errors in different aspects of their filed tax returns.
Nevertheless, taxpayers in both categories need to fully prepare for the state tax audit and get good representation for their audit defense. This is because, facing a state income tax audit without adequate knowledge and a good representation can always result in the negative effects which can be in form of tax penalties or interests, fines, or even criminal prosecution in extreme cases. You can reach out to us for help at any stage of your tax audit; we are here to help.
Taxpayers that have gone over their tax documents, returns, and financial reports with their legal advisor and find no irregularities (or find only minor, overlooked mistakes) need not panic yet for they might have been selected randomly for the audit exercise, and may have a greater chance of scaling through the audit easily and successfully. However, taxpayers that have committed willful offenses on their tax reports, such as understating their tax liabilities or getting involved in fraudulent activities, have every reason to panic because the tax audit might lead to life-altering results like a jail sentence. Therefore, to get the best defense for the tax audit, taxpayers that suspect that they were singled out for the audit for a reason need to get themselves a good criminal defense attorney immediately when the tax audit notice is received. This step is necessary to get the best defense required and avoid jail time.
What You Need to Know when facing a state income tax audit
- After receiving the notice for a state income tax audit, don’t see yourself as a victim yet, instead, take charge of the situation. Start by selecting the date you would want the state tax auditor to come in. Choose a date that will give you the sufficient time you would need to prepare for the audit, locate any missing documents and certificates, and retain good legal counsel for your audit defense. To scale through a tax audit, good preparation, documented evidence, and solid representation are vital ingredients.
- When facing a state income tax audit, you will need to first gather necessary information, documents, and certificates that will support you. Your defense is in your reports and these are extremely valuable. One will need to start gathering all financial records, reports, and financial documents that can support the claims you have filed in your tax returns and all your reported figures. Even reports of donations to charity must be collated for sufficient evidence for the audit defense.
- With the help of your financial tax preparer, it is advisable to carry out a personal internal audit to find out if there are errors or inaccuracies in your financial reports. This will help you prepare for any surprises you might encounter during the state income tax audit. You can also contract out this internal audit to an external financial auditor to be sure of an accurate report before the state tax audit actually takes place. This will go a long way in answering questions relating to your financial reports and being informed can help reduce your potential tax penalties.
- Important and requested information and documents should be delivered promptly when requested during a state income tax audit. Make your financial reports organized and well documented to prevent delays in delivery when requested. Unnecessary delay may make it seem you have something to hide and lead to more complications during the tax audit. However, you should deliver the requested documents relevant to the personal income or business being audited and only that.
- Cooperate fully with the auditor and act professionally at all times. Being unnecessarily rude and uncooperative will eventually lead to more problems for you. An upset auditor will have more motivation to find errors that can implicate you in your financial records. Be polite, smile, welcome the auditor properly, and give them a good environment to work. Your cooperation and professionalism will go a long way to help you through the audit process.
It is more advisable to avoid tax situations that can lead to an audit than to learn how to face an audit. It is in the taxpayer’s best interest to always file accurate and correct tax returns with the help of a tax preparer to avoid the possibilities of being flagged for a tax audit.
However, in a case where you are already facing a tax audit, your response is the most important aspect. Instead of responding from a place of panic and fear, good record-keeping and adequate representation is always the best response.
Your preparation will determine how the tax audit will go. To prepare for a state tax audit, you would need to have all your documents and certificates ready, maintain a good professional attitude, and retain good legal representation. This is your best tax audit defense. Contact us today.
We are a tax relief firm dedicated to giving you the best results regarding resolving your tax debts. Our team of qualified professionals is available round the clock to provide you with the assistance you need to overcome your tax debts and be well on your way to financial freedom. Contact us now at 888-585-8629 or 617-430-4674 or send us an email at [email protected].
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