Common Triggers for NC State Tax Audit You Need to Know

Has your business collected and paid the correct amount of sales tax? If you’re unsure or in the midst of NC state tax audit, you’re not alone. Almost all companies undergo a tax audit at some point. It is not only a nerve-racking and time-consuming experience, but it also exhausts valuable resources.

The concern is, what triggers a state tax audit? Is it less severe than an IRS audit? Would a state tax audit result in an automatic IRS audit? Here’s what you need to know about state tax audits.

Our tax audit guide entails the common triggers for tax audits in North Carolina. Let’s start with the basics.

What is State Tax Audit?

A state tax audit is an audit performed by your state’s Department of Revenue because they believe there is a discrepancy on your state tax return. It is no less severe than an IRS audit and can result in financial and legal consequences. During the audit, your state will review your state tax return to verify your reported income and deductions are correct. Typically, your state will send you a written notice in the mail to inform you of the audit.

The notice should include the tax years they plan to review. It will also note any information you will need to provide and their contact information. You can opt to have an accountant or tax attorney represent you during the audit or proceed without one.

Once the audit is completed, your state will send all NC state auditor candidates a written notice of the results. The results can lead to acceptance of your state tax return with no further action needed.

However, it can also result in taxes and penalties owed. The taxpayer may be entitled to appeal the judgment if they don’t agree with the audit results. Depending on the state, the appeals procedure may include a hearing before an administrative law judge or an appeals board.

How Does NC Tax Audit Work?

The auditor reviews your records over a period of days, weeks, or months to discover oversight or fraud and promote compliance with tax laws. The auditor’s goal is to increase revenue for the state and apply penalties when a business owes taxes.

The job of a sales tax auditor is to:

  • Search for mistakes, errors, and omissions in data
  • Examine discrepancies between primary-source data and sales tax returns
  • Make sure you charged and paid the appropriate amount of tax on purchases
  • Ensure you charge appropriate taxes on shipping
  • Review sales tax exemption certificates with resales

How Long Does Tax Audit Take?

The duration of a tax audit depends on several factors, including company size, audit schedules, activity in the local jurisdiction, the complexity of the data and issues involved, and the transparency of the data.

Large, complex companies may have very short audit cycles because tax departments are equipped to provide the exact documents and data auditors require. The best-case scenario is that a sales tax audit will take one to six months to complete — or, worst case, up to years.

What Triggers NC State Tax Audit?

You should be aware of frequent errors that can result in a state tax audit. These can include:

Failing to record all income – You are required to report all income, including self-employment, rental, and investment income. Not doing so is one the fastest ways to trigger an audit.

Being a nexus – If your business is a nexus, or a company that has a presence in one or more states, you might be at risk of a state audit. Each state will want to ensure you are complying with their individual tax laws.

Failing to report use tax – If you purchase taxable items in one state and intend to use, store, or consume them in another state, you must pay use tax in your own state. For example, if you purchase a car in a state that does not charge sales tax, but plan to use the car in a state that does, you must pay use tax on the purchase price of the car in your state.

High-risk industry – Your industry is known for substantial non-compliance or underreporting sales taxes. Different industries have different indirect tax needs.

Complex industry – You operate in a high-revenue, high-volume industry with complex sales and purchases. For example, companies in the oil and gas industry are targeted more frequently for audits and would benefit from tax determination software for that industry.

Compliance checks on a new company – You’re a new or small company selected for an audit by the Department of Revenue to help keep your books and processes in order and maintain compliance with state tax regulations before you grow too quickly or get too big.

What’s the Solution to Triggers?

Facing triggers for a NC state tax audit can be intimidating, but there are proactive steps you can take to mitigate the risk and ensure compliance with state tax laws. One effective solution is to seek the guidance of a knowledgeable tax attorney like Brian D Westrom Attorney at Law, who specializes in handling tax-related issues in North Carolina.

If you’re concerned about a potential North Carolina tax lien case that could result from an audit, consult with a tax lien lawyer who can provide valuable insight and legal representation. These professionals are well-versed in state tax laws and can help navigate the complexities of tax liens, ensuring your rights are protected throughout the process.

Additionally, conducting a North Carolina auditor property search can help identify any discrepancies or issues that may trigger an audit. By staying proactive and addressing any potential red flags before they escalate, you can minimize the risk of facing a state tax audit and ensure compliance with state tax regulations.

IS There Any Best Tax Audie & Tax Lien Lawyer Near Me? Brian D Westrom IS Here!

Whether you’re dealing with common triggers for NC state tax audits or need assistance with tax compliance, we’re here to provide the support and representation you need. Don’t let tax issues jeopardize your business’s financial stability—contact Brian D Westrom Attorney at Law today and let us help you safeguard your business against state tax audits.

Contact Brian D Westrom Attorney at Law today for expert assistance and personalized solutions tailored to your business needs.