These audits are very complex and the reason that they’re complex is they involve a very large degree of data. So for example, when you’re dealing with an income tax audit you can go through a company’s bank deposits and determine pretty quickly how much income they had or didn’t have. With a sales tax audit you’re dealing with taxable sales so if you picture a restaurant, for example. Say your average restaurant does a hundred transactions in a day over
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What Does the CDTFA Sales Tax Audit Process Look Like?
CDTFA auditors are looking for mistakes. They’re looking at your data, they’re looking at how that data relates to each other, they’re looking at the returns that were filed and they’re looking for any errors that exist. The most common errors are discrepancies between primary source data and the sales tax returns that were filed. For example the sales on your federal income tax returns don’t match the sales that were filed on the sales tax returns.
What Do CDTFA Auditors Look for in a Sales Tax Audit?
CDTFA auditors are looking for mistakes. They’re looking at your data, they’re looking at how that data relates to each other, they’re looking at the returns that were filed and they’re looking for any errors that exist. The most common errors are discrepancies between primary source data and the sales tax returns that were filed. So for example, the sales on your federal income tax returns don’t match the sales that were filed on the sales tax returns. The auditor will find that error and figure out a way to calculate what the true percentage of sales were or at least true from the auditor’s perspective.
What Are the Risks for Tax Payers in a Sales Tax Audit?
The biggest mistake that I see taxpayers make and the biggest area of risk that they have is the dangerous assumption made by taxpayers that because they “didn’t do anything wrong” in the sales tax audit, they don’t have anything to fear. The reality of the situation is that the auditors are looking for mistakes in the way that the taxpayers filed their sales tax returns and in the amount that they paid. The auditors are devoting a significant amount of time and energy to going through all the taxpayer’s data and verifying their taxable sales so the reality of the situation is is that even if you don’t feel like you made a mistake,
What Type of Documentation Will I Need in My Sales Tax Audit?
Here is a list of documents that you will need in a sales tax audit. Watch to know more about the types of documents.
Do I Have to Provide All the Documents the Auditor Is Requesting?
Watch this video to know if you have to provide the documents that are requested by the auditor.
What Do I Do If There Is a Really Serious Error on My Tax Returns and I Get Audited?
Unlike other forms of audits, serious errors on sales tax audits are usually pretty easily discoverable. One of the biggest mistakes that people make is they underreport their sales tax returns but their federal income tax returns show the true amount of sales. The auditors take what I call here big five data points: sales tax returns, your federal income tax returns, your internal accounting, your bank statements and your 1099Ks. They line up all that data together, that’s a pretty good indicator out the gate of whether or not there’s a discrepancy or whether or not your reported taxable sales are accurate. So anyway, this is a big problem because it’s very easy to see serious errors out of the gate. So the first thing you need to do is understand how serious
Can I Go to Jail for Errors on My Sales Tax Returns?
The CDTFA thinks you’re willfully under reporting sales tax and/or fraudulently filing returns.
How Much Is it Going to Cost Me for Brotman Law to Defend Me?
In a sales tax audit, as I’ve mentioned before, sales tax audits are very cumbersome processes. They involve a lot of documents, they involve a lot of data and they take a while to get through and our firm efficiency is one of our key factors in the work that we do. We want to make sure that the work and the value that we’re providing for clients are in a line with their cost expectations. With that said, sales tax audits are a lot of work. There’s a lot of organization and presentation and the materials. There’s a lot of tendency for disagreements in sales tax audits, particularly when they’re using statistical samples. Oftentimes those statistical samples come out wrong on the CDTFA side and we have to correct them and it gets tough when you have an auditor and you get into a conflict with that auditor and the auditor won’t back down. So with that said, sales tax law does have the ability to drive cost. One of the things that we do to mitigate cost is by sticking and trying to minimize cost in three key areas.
Is it Possible to Settle With the Auditor?
Unfortunately playing let’s make a deal with the Auditor is not really possible. It’s not possible to just throw out a number, let’s say $25,000, to make the auditor go away. However in the context of any sales tax audit, there’s a certain amount of horse trading that happens in order to get to a result from the CDTFA’s perspective. CDTFA would rather close the audit as agreed than have an audit going into appeals. The more cases they close out at the audit level,