Finance Home  |  Business Tax Compliance and Audits
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The Compliance Division performs routine to complex audits of business financial records and operations to determine accurate assessments for local taxation of businesses. In addition, Business Tax Auditors work on revenue discovery, taxpayer education, field inspections, and court cases.

 

The goal of our audit program is to ensure compliance with Virginia law. Business tax audits validate financial calculations, ensure that license classifications are appropriate for the business being conducted, and that all applicable taxes are being assessed.

 

 


Basic Audit Procedures
There is no one best way to select accounts for audit.  The sources of information available are wide and varied and new information is constantly being obtained.  Combinations of the following sources have historically contributed to success in selecting an audit subject: 

- Recommendation from County staff based on knowledge of questionable filings or business conditions.

- Expansion to all licenses of a certain business type once errors in reporting or classification are discovered in the audit of a similar business.  This requirement furthers the goal of uniformity.

- Comparison of licenses filed to other sources of receipts such as state sales tax returns or Schedule C filings received from the Department of Taxation.

- Analysis of comparison reports that contrast prior year filings with the current year to identify any large variances.

- A taxpayer’s request for refund will also sometimes trigger an audit.  Before a refund will be issued for any type of business tax, it must be verified that all taxes for the current and three prior years have been properly filed and paid.

- In accordance with Virginia Code Section 58.1-3(A) 2 which states, "Acts performed or words spoken or published in the line of duty under the law" allows auditors from other localities to share information that was obtained during their audit of a business that also holds a County of Albemarle license.

- Auditors record the names of potential audit candidates discovered while performing their "in-house" office duties during the business license renewal season.  The issuance of business licenses and the yearly assessment of personal property enable the auditor to detect discrepancies and/or misinformation filed by taxpayers.

- Unfiled returns are also triggers for conducting an audit.

- New businesses established within the past three years generally are audited to verify the correct classification and reporting methods.



What to expect during an audit?

If you are identified as an audit candidate, you will receive a letter requesting books and records reflecting business transactions for the time period indicated in the letter. Audits are usually conducted for a 3-year period but may be expanded up to 6 years if returns are not filed when required. Annual financial summaries are generally accepted. Such summaries may include:

 

- Bookkeeping records

- Federal tax returns

- General Ledgers

- Profit & Loss Statements

- Trial Balances

Once your records have been reviewed, a field audit or on-site examination of returns and records will be scheduled. The auditor will describe the types of records that need to be made available and will explain the planned audit method and procedures. 

In concluding an audit, we will do the following:

- Discuss our findings with you and send you a letter explaining any changes.

- Explain any penalties to be billed.

- Discuss future filing responsibilities and answer any questions you have concerning the audit.

- Provide you with a copy of the audit report identifying issues to be corrected for future compliance as necessary.

- Explain your rights to appeal should you disagree with the audit findings.

 

If you do not respond to the audit letter, or if you are unable to demonstrate that you do not owe additional tax, we will bill you for the additional tax, as well as applicable penalty and interest. If our tax audit raises an issue that affects your state taxes, we may notify the state.


 

Other Audit Functions

In addition to conducting tax audits, the Compliance division works on discovering untaxed businesses, conducting site-visits, developing taxpayer educational material, and initiating legal proceeding against businesses that are not willingly complying with Virginia tax laws and regulations.

 

FOR MORE INFORMATION:

Call the Revenue Administration – Compliance Division at (434) 296-5851, Option #4.