If you receive a call from a tax auditor, informing you that you have been selected for a “routine” audit, this is what you should do:
1. DO NOT provide any details about your sales, records, and business. The truth is, you don’t know who’s calling you, and disclosing financial information to a stranger is a lot to ask. The CDTFA understands this and will make reasonable accommodations.
2. Ask for the auditor’s name, phone number, email address, office address, supervisor’s name, and supervisor’s contact information.
3. Ask why your business was selected for the audit. The auditor will probably respond with their scripted response, “It’s just a routine audit.” This is their attempt at lowering your guard to be more compliant with their requests. Again, you don’t know who this person is and until they verify their authority, it’s best not to disclose privileged information.
The audit is not routine or random. Your business was selected for a specific reason and they want to gather additional information to see why their data indicates there could be tax errors.
4. Ask the auditor to send you an engagement letter by mail. This will serve as the first step at validating the auditor’s authority and will give you a few extra days to contact your tax professional.
5. Notify your tax professional and provide the information you obtained.
6. Furnish a copy of the engagement letter to your tax professional when you receive it.
Discuss your options with your tax professional and proceed with your best judgment. A word of caution, carefully consider your tax professional’s position. Some tax professionals are excellent at income tax but lack the expertise in sales tax matters to achieve a level of creativity during an audit. Try to measure how agreeable your tax professional is to the resolution the auditor proposed and ask for options. A tax professional who is incapable of providing alternatives may not understand the audit process and the risks/rewards involved with each step.
SoCalTaxShield.com provides audit consultation and representation services and can assist your business or client successfully defend from a sales and local tax audit.
