Frequently Asked Questions About Audits

Business owners in Texas can be subject to state tax audits. While the auditing process can be intimidating, the more information a business owner has, the better they can face the different steps of the process. The following questions can help you understand the audit process and improve the chance of a successful outcome. 

How Are Audit Targets Selected? 

Audits are not always triggered by wrongdoing. In some cases, a business or individual selected for an audit can be selected on a random basis. In other cases, an audit may be triggered by inconsistencies within a tax form. If a business was subject to a previous audit and owes taxes in excess of $25,000, they may be audited again. 

How Far Back to Audits Go? 

In general, audits can go back as far as four years into a tax record. For this reason, it is recommended that you retain all records related to taxes for at least four years before discarding them. In some cases, the auditor may need to go back further. This is usually the case when there are allegations of fraud or when the business was supposed to have a permit but lacked one. 

Why Are Audits Conducted? 

Audits are conducted to ensure taxpayers in Texas are compliant with all relevant tax laws. Auditors want to promote voluntary compliance and ensure taxpayers are completely aware of the proper steps when paying taxes. Auditors also want to be certain that tax laws are applied fairly and evenly. While looking for under and non-payment of taxes, auditors also want to ensure that taxpayers are not paying more in taxes than is necessary. 

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