Each year, the South Carolina Department of Revenue (SCDOR) audits hundreds of businesses. The audits help ensure compliance with the state’s tax laws.
What can trigger an audit? The SCDOR uses data analytics to assist with audit selection and sometimes conducts “relationship audits,” which develop from information gathered during another audit. Tips from the public can lead to audits as well.
What should you do if your business is selected for an audit? Here are some tips:
• Don’t panic. Just because you are undergoing an audit doesn’t mean you should worry.
• Be prepared. Gather the relevant documents before the audit, which may include income and expense records for the time period requested. Audits generally look at returns during the past three years. The audit may be done by mail or in person.
• Keep good records. You should keep business records for up to six years, including documents used to file your returns. These include canceled checks, bank statements, accounts payable and receivable records, inventory schedules, payroll records, sales and invoicing details.
• Be cooperative. Be courteous and professional with the auditor. Provide any business records requested. If the auditor requests a tour of your business, grant the tour so they will better understand how your company operates.
• Consider asking others to be present, such as a tax professional who helped you with your return and your bookkeeper.
What to expect after the audit?
• The auditor will provide a list of findings, including any assessment. You generally will have 30 days after findings are first presented to provide more information, if you feel that will help.
• The audit findings may not propose any change, in which case no action is needed.
• The findings may propose changes to which you agree and some with which you disagree.
What if you disagree?
• You may file a protest in writing to the SCDOR.
• You have 90 days from the date of the assessment to submit your protest.
• The portion of the assessment with which you agreed should be paid to avoid any interest and penalties.
• In most cases, you do not need to provide legal or other authority if the amount of the assessment is $2,500 or less. You may represent yourself or have someone represent you, such as an attorney or certified public accountant.
• The SCDOR will discuss the matter with you by phone or in person. If initial efforts fail to resolve your protest, a conference will be held by the agency’s appeals section.
• If the conference does not resolve your protest, the matter can be heard by the General Counsel’s office, which will then issue a determination.
• You may appeal any determination by the General Counsel to the Administrative Law Court within 30 days.
For more information on appeals, visit the SCDOR website at dor.sc.gov/appeals. To read the Taxpayers’ Bill of Rights, visit dor.sc.gov/taxpayeradvocate. Visit IRS.gov for information about IRS audits.