In 2013, it was reported that your overall chance of being audited by the Internal Revenue Service (IRS) is approximately 1 percent unless you’re making $5–10 million, in which case it’s 18 percent, or more than $10 million, in which case it’s 27 percent. If you are one of the unlucky winners of this “reverse lotto,” look to our legal team at Huntsman | Lofgran, PLLC for help. We regularly counsel and represent Utah residents and business executives who are compelled to navigate IRS and Utah State Tax Commission audits — and we are successful more often than not, in helping taxpayers mitigate their liabilities and return to currency.
Of course, having a high income isn’t the only factor that can increase your chances of being audited. Indeed, the following may set off red flags for government scrutiny:
By the way, math errors may trigger an IRS inquiry, but they rarely lead to a full-blown examination.
Utah’s Tax Commission maintains a staff of approximately 125 tax auditors, including specialists in income, sales, corporate, mining, severance, and miscellaneous taxes. You generally have 30 days in which to file an appeal against an audit assessment. State audit triggers very much follow along the same lines of the IRS audit triggers described above.
The Utah State Tax Commission also assigns compliance auditors to investigate “nexus” — that is, to determine if there is cause for a multistate business to pay sales tax, income, franchise and other business taxes to the state of Utah. To date, state income tax nexus has been created when an out-of-state company derives income from sources within the state, owns or leases property in the state, or employs personnel who engage in activities that go beyond those “protected” under federal interstate commerce laws.
Despite the fear they instill, audits are survivable. If you get audited, it’s important to retain a tax law firm that understands tax law on the local, county, state and federal levels, a firm that defends your rights and represents your best interests while setting your affairs straight with tax authorities. Call Huntsman | Lofgran, PLLC today at 801-474-0031 to arrange for a free initial consultation, or contact us online.