State audit vs Federal audit: Which is better?

State audit vs Federal audit: Which would you rather face?

Which would you rater encounter, a State audit vs Federal audit? If you’re getting audited by your state’s Department of Revenue or by the IRS itself, you most likely know that a tax audit is a tax audit, regardless of the formal body carrying it out. You, however, might be curious to know what a state tax audit is, how it differs from a federal one, and what happens when you get audited by state or federal tax authorities. This article will answer those questions and more.

If you’re getting audited by state tax authorities, fully understanding the state income tax audit process, knowing how it works, and what happens when you get audited by state revenue authorities will help you feel more prepared to face the entire process.

When you are being audited, the major difference in state audit vs federal audit is who carries them out, and what they focus on. While a state tax audit is concentrated on your state tax return and is executed by your state’s Department of Revenue, Federal audits focus on your federal tax return and are performed by the IRS.

Thus, it is possible to have an issue with one and not with the other or to be facing two tax audits because each body is independent. Additionally, it is possible for a federal audit to trigger a state audit and vice versa; however, that happens only on rare occasions.


What triggers a State Tax audit?

If a taxpayer fails to report all of their income or falsely claims a dependent on their tax return, this falsehood likely exists on both federal and state tax returns, therefore, an audit can be triggered on both federal and state levels. The IRS and state organizations will typically be in communication with each other in such situations, and the result of their decision can have serious financial implications for you.

A few things that can trigger a state and federal tax audit include:

  1. Earning a very high income
  2. Running a cash-intensive business
  3. Taking an unusual amount of deductions in comparison to others in the same income bracket
  4. Having unreported Income
  5. Multiple parents/ caregivers claiming the same dependent
  6. Filing a tax return with errors
  7. Writing off personal expenses as deductions
  8. Not filing your tax returns or filing incomplete returns
  9. Recording a sudden change in income, lifestyle, or expenses

Additionally, filing a Schedule C return (for small business owners) may also slightly increase your chances of getting audited.



  • Can the state audit your taxes?

Yes, your taxes can be audited by the state.

  • What happens when you get audited by state authorities?

After the audit, you will get notified of the result of the audit in writing.

  • How long does a state tax audit take?

Depending on the issues involved and how complex they are, a state tax audit process can go on for a period of three to six months.

  • What do state auditors do?

State auditors monitor the accounting and financial functions of the state.


Souri, Gazda, & Co.

If you’re being audited either by state or federal, you don’t have to face it alone. You are strongly advised to get someone to represent you.

Souri, Gazda, & Co. is 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].

For more information, email [email protected]

Internet subscribers, users, and online readers are advised not to act upon this information without seeking the service of a professional accountant. Any U.S. federal tax advice contained in this website is not intended to be used for the purpose of avoiding penalties, of any kind, under U.S. federal tax laws.