Audit Defense

Answer Another tool that an auditor could use is what's known as a lifestyle or net worth analysis. If you're only operating one source of income, you have a business that's your sole source of income and you're not reporting a lot of sales and yet you're living in a three million dollar home and

Answer Frequently during an audit the auditor may question whether or not the purchases that they have that you've reported in your books or records is complete and the way they would do that would be to circulate the vendors. That is they would send a letter to your major vendors and ask them to

Answer A popular method that auditors like to use is what's known as the credit card ratio analysis. This is where they would look at either what's known as a 1099K, which is an annual statement that you receive from your merchant card processor. They would then compare the amount of credit cards reported as

Answer Another common technique would be the observation test method. This is where the auditor would come into your place of business, spend a day or maybe over several days and they would observe what's going on at your business. They would observe the volume of sales, the volume of customers, the types of sales

Answer With bank deposits one of the things that the auditor would do is they would look at the deposits in your bank account, both from credit card and cash sources, and make certain adjustments to the deposits, such as if you collect sales tax reimbursement, they would need to back that out. For example,

Answer With the markup, an auditor would establish what your purchases are. The first thing they would look at is actually your reported markup off your federal income tax returns and see what that reflects. Then they would analyze that, usually with what's known as a shelf test. They would look at a number of

Answer Auditors have a lot of discretion and they could use a number of different methods when the taxpayers are determined to have insufficient records. One would be to do a markup analysis. They can markup your purchases, your cost of goods sold. Another would be bank deposit analysis, analyzing your bank statements. Another would

Answer Generally speaking the board is only going to consider your case for a settlement proposal if either they don't feel that you have the money to pay that liability that they're proposing and/or you will not be able to come up with the money in a reasonable period of time, which it would be

Answer If you're dealing with an auditor who's overly aggressive, probably the best thing to do would be to hire a consultant - a sales tax expert to help you. You generally as a taxpayer aren't aware of what your rights are during an audit and an auditor could violate your rights and you wouldn't

Answer Choosing where to have the audit depends on several factors, one of which would be where the books and records are maintained. If the books and records are maintained in your office and they’re voluminous, it might be better to have the audit done in your office. However, if the records are electronic or