An audit is when a tax agency asks you to verify the information on your tax return. For example, a sales tax audit is when the state asks for more information about your sales tax returns. This is often a drawn-out and complicated process, but with well-organized records, you can sometimes get through audits relatively painlessly.
This guide explains what to expect if you're facing a Texas sales tax audit. It also answers common questions about the audit process, audit penalties, and more. To get help now, use TaxCure to search for a tax pro based in Texas who has experience dealing with sales tax audits.
According to the Office of the Comptroller's website, Texas sales tax audits help to reduce tax evasion and ensure the state's laws are uniformly applied. Audits also help to promote compliance — in other words, when taxpayers know there's a risk of an audit, they're more likely to file honest returns.
The state website also claims audits are educational. It says auditors can help business owners find bookkeeping mistakes. This may be the intent of the state revenue agency. Most auditors don't have the time to help you fix your bookkeeping records.
Remember, auditors work for the state. To get through the process, you should have someone in your corner who is focused on your best interests.
The Texas Office of the Comptroller selects some businesses randomly. Typically, it selects a sample of businesses from different industries to audit. Among the most popular businesses subject to audit are restaurants that serve alcohol. One reason for this is that the sales tax rules for these businesses have an added layer of complexity due to the high volume of cash sales and additional taxes on the sale of alcohol.
The state also selects audit targets based on information from other state revenue agencies, tax returns, and business periodicals. It may also follow up on tax evasion leads submitted by concerned members of the public.
Aside from restaurants, the state is most likely to audit the following: 1) businesses that owed over $25,000 in previous sales tax audits and 2) the businesses that report the highest amount of sales tax on their returns.
During a sales tax audit, you provide the Comptroller's Office with information about your sales tax return. The auditor reviews the information and decides whether to change your return or accept it as filed. Here's a breakdown of the process.
