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Compliance audits:

Compliance audits are performed by the state and/or local taxing jurisdictions to confirm that the tax liability reported and payments made to the jurisdiction by you represent your obligations under the code. Field audits on a regular three- or four-year cycle for large taxpayers, occasional randomly selected audits for smaller businesses, and desk audits for most other tax returns are the current standard in all states. The audit finding is then followed by a formal assessment, access to a series of remedies, and finally possible settlement of disputed findings through the judicial system. A taxpayer that fails to comply with a jurisdiction's laws may be subject to penalties, attachment of assets, seizure of property and imprisonment of its officers.

Taxpayer assistance:

Tax statutes are not easy to understand so the agencies responsible for their administration are charged with assisting taxpayers in attaining complete compliance. Taxpayer assistance takes several forms. One form is to interpret the statutory language into words most people can understand. This form, however, can be almost as difficult to understand as the original legislation. Another form occurs when you request a clarification in writing. The code may guarantee that such advice or opinions can be relied on for a least one audit cycle.

CAUTION: Advice that is the result of an audit in one cycle may be ignored by a subsequent auditor from the same jurisdiction in a follow-up audit. TIP: When requesting written advice, always request the citation of authority upon which the advice is based.

Due process:

Every code provides for administrative and judicial remedies to guarantee you due process before the law. The remedies may be found in a separate code section dealing with taxpayer right of appeal. If you fail to follow these procedures in both a timely manner and in the order specified you may lose the right to the due process.

Statute of limitations:

Each code provides a statute of limitations to indicate when the time has run to assess unpaid or partially paid taxes. The statute of limitations also provides the time limit for claiming refunds of taxes paid in error. The two key elements to the statute of limitations are time limit and beginning date. The time limit is typically two, three or four years. The beginning of look back period is the date of the oldest period open under the statute of limitations, which would be either: (1) The date of timely filing plus the statute period indicated in the statute of limitations, or (2) The date you become qualified or should have registered to do business in the jurisdiction, but failed to register.


For a return that is due and not filed the limitations period remains open until the return has been filed or an assessment made. A taxpayer may sign a waiver to extend the limitations period. The statute of limitations remains open to the extent prescribed by and agreed to in the waiver. Waivers should be fully understood prior to being signed. They can be beneficial (keep a refund period from expiring) or detrimental (keep an assessment period available). Denying an auditor a waiver may result in an arbitrary assessment. Taxpayer Bill of Rights: In recent years states have passed Taxpayer Bills of Rights legislation in an attempt to show an awareness that you may require special assistance beyond the code and may deserve some amount of customer service from the taxing agency.

Some of the key characteristics of these provisions are:

  • Creation of an impartial third party to assist in helping you through the process
  • Evaluations of the employees of a taxing agency that are not based on enforcement quotas
  • Interviews may be recorded
  • An agency may be sued
  • Attorney's fees may be awarded if the agency loses an appeal
  • Published procedural instructions and advice are available. 
  • We would be happy to assist you in navigating this tangled web.



Feel free to call or e-mail us to discuss any tax issues you may have.


Last modified on Sat Oct 18 2014 23:40:19 UTC.
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