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Tax Examination, Audit Notices & Assessments
If your company received a Notification of Intent to Audit Books and Records (DR-840, CA-I, RT-FL06F, etc.), Intent to Make Audit Changes (Form DR-1215), or a Notice of Proposed Assessment from the Florida Department of Revenue, then your company is under examination and audit of a major Florida tax, such as sales and use, corporate income, reemployment, or other taxes. The Department may propose changes and adjustments to your return, which may result and having to pay additional taxes, interests, and penalties. It is recommended that you proceed with caution during this examination, make sure that you provide only the information that is requested of you, and that you have proper representation from a CPA or Tax Attorney with tax examination experience. You should not ignore the Department’s requests, as it will only make things worse.
At the beginning of such audits, the auditor will likely provide you with a questionnaire that you must answer carefully and will request a list of records, which may include: Florida tax returns, federal tax returns, asset information and depreciation schedules, general ledgers and journals, property records, disbursements and cash receipts, purchase and sales journals, sales tax exemption or resale certificates, and other types of documents to verify information entered in your tax returns. The information requested will depend on the type of tax that is under examination, such as reemployment (formerly unemployment taxes), sales and use, or corporate income tax. If you do not provide the requested records, the Florida Department of Revenue will estimate your tax liability based on available information, which will likely be to your detriment.
During a field audit, the auditor will ask you important questions related to your tax examination. It is recommended that you have CPA (Certified Public Accountant) or Tax Attorney with experience in tax audits and tax examinations to prepare you for the audit and represent you during the process. You must complete a Power of Attorney to allow the state to discuss the audit with your representative, and if a tax auditor contacts you with questions, it is recommended that you inform the auditor to contact your representative and forward all questions to your CPA or Tax Attorney.
The auditor may ask delicate questions about your type of business, organizational structure, accounting methods, and systems, among other things. Additionally, your CPA or Tax Attorney can request to have the audit at their firm, rather than at your location of business. This will ensure that the auditor communicates directly with your representative if he or she has any questions.
Conclusion of the Audit
At the conclusion of the audit, the Department may make proposed changes and provide a Notice of Intent to Make Audit Changes (Form DR-1215), which explains the audit results and information to appeal. You have 30-days from the date of this form to agree or disagree with their audit findings. Otherwise, you may receive a Notice of Proposed Assessment. If you agree with the auditor’s findings but cannot pay the liability, discuss with your CPA or Tax Attorney what your options are. If you failed to respond to requests from the Department, your options are limited, but you should discuss with your CPA or Tax Attorney if you have any other options left, as you may have other options or resolutions available.