Sales and Business Tax Audit
Maryland Tax Attorneys offering state tax audit help to Baltimore, Annapolis and the entire mid-Atlantic region
You are a business owner, and you work hard to generate sales and increase your profits. Perhaps you maintain a payroll and are a steadfast employer for a diligent and reliable group of people. You do your best to properly maintain your books and records, keep on top of your quarterly tax payments, and make every attempt to adhere to Maryland’s complex tax code. Yet still, you are facing an audit from the Maryland Comptroller.
If this is your situation, we are here to help. The Maryland tax lawyers at Rosenberg Martin Greenberg offer a compassionate and meticulous team of tax professionals and support staff ready to help you tackle your state business or sales tax audit. If you believe you may be currently under an investigation, or you have received a notice from the Maryland tax authorities, now is the time to contact Rosenberg Martin Greenberg for support and legal counsel. Don’t wait until it’s too late, call us today.
State Tax Audit Triggers
Sometimes, tax audits are conducted at random. Other times, a business is targeted due to the occurrence of several red flags. For instance, any of the following factors about your business enterprise may prompt Maryland tax officials to take a closer look into your finances:
- Prior history of tax-related issues
- Mistakes on your tax return forms
- Sudden dramatic increases in income
- Extensive business expenses
- High deductions
- Missing income or underpayment of your tax due
Many of these so-called “red flags” are completely preventable, and may not result in a major fine or penalty. However, intentional conduct to evade or avoid paying business-related taxes could result in serious civil and criminal liability – so never work with state auditors unrepresented.
Types of Business Audits in Maryland
As you well know, the Maryland Comptroller is a separate and distinct taxing authority from the Internal Revenue Service. Therefore, it maintains its own set of rules, regulations and audit concerns.
The most common type of audits conducted in Maryland include the following:
- Business income tax
- Employer withholding
- Sales and use tax
- Alcohol and tobacco tax
- Motor fuel tax
With regard to a business income tax audit, the Comptroller is concerned with several areas. First, your audit will review your books and records in order to compile data about your income and expenses. Keep in mind, it is rare for the auditor to request your entire set of books and records, and you will likely only be required to provide a sample of records from within a finite period of time.
If you are facing an employer withholding audit, the auditor will likely request documentation detailing your bi-weekly or weekly payments to certain employees, as well as documentation detailing the amount of employer withholding you retained during each period. Unlike the IRS – which can request documentation over the past three years – the Maryland Comptroller’s Office generally tries to keep the investigation relatively limited, unless there are serious long-term tax evasion concerns.
Sales and use tax audits, as well as alcohol and tobacco tax audits, pertain to the six and nine percent (respectively) sales tax that a seller must retain following every sale. If the Comptroller believes your business has been improperly withholding sales tax or otherwise not following sales and use tax laws, you may face an audit. Rest assured, it is not uncommon for an audit to result in a minimal or non-existent additional tax assessment.
Maryland Compliance Programs
Maryland maintains a three-unit group of agencies responsible for ensuring business taxes are paid properly and in full. The Business Nexus Unit is responsible for determining whether a taxable “connection” exists for purposes of assessing income and/or sales and use tax. The BNU takes complaints from taxpayers, reviews federal returns to ensure compatibility, and conducts audits of business tax matters. A similar unit known as the Individual Nexus Unit works to uncover similar issues with non-payment or underpayment of individual Maryland state taxes.
Lastly, the Tax Investigations unit is responsible for conducting both civil and criminal investigations into Maryland businesses and individuals having failed to file a state income tax return. Much of the Task Investigations Unit’s resources derive from information procured from the Internal Revenue Service, including incompatible state and federal returns.
What to Expect at Your Audit
You will receive a notice from the Maryland Comptroller’s Office if you have been selected for an audit. Do not ignore this notice, and call the Baltimore tax audit attorneys at Rosenberg Martin Greenberg immediately – you need to prepare!
The Comptroller’s office generally gives targeted businesses one week to prepare for an audit; however, auditors are generally flexible with scheduling an audit appointment time. If an extensive postponement is requested, however, the auditor will likely extend the temporal breadth of the books and records reviewed at your audit.
Your audit will begin with a conference between yourself and the auditor. The auditor will ask general questions about your business, how you make money and how your money is handled. From there, the auditor will request a sample of books and records – which could be larger if major fraud is suspected – and will begin to review the numbers contained in your financial records.
At the conclusion of your audit, the auditor will meet with you again to discuss his or her findings, as well as the computation of any additional taxes owed. At the conclusion of the closing meeting, you will be asked to sign an acknowledgement letter certifying that you were apprised of your tax situation.
Contact Us Today – Don’t Go it Alone!
A business tax audit can be an overwhelmingly daunting endeavor; however, Rosenberg Martin Greenberg is on your side. We have a vast understanding of both Maryland and federal tax laws, and can help you prepare for your upcoming audit.
For help, call please call Brian Crepeau at 410.649.4981 or email firstname.lastname@example.org.
Talk to a Baltimore Tax Attorney Today
If you are seeking counsel for a tax related legal matter, contact the Rosenberg Martin Greenberg Tax Controversy experts.
Tax Controversy News
The extended government shutdown is adding to the anxiety that some taxpayers feel with respect to when they will get their refund. The tax attorneys at Rosenberg Martin & Greenberg LLP cannot answer that question with any degree of certainty. We can, however, provide some guidance that will help taxpayers avoid the problems that can…
Taxpayers who own business or rental properties will have legitimate questions about the aggregation rules for Section 199A of the Tax Cuts and Jobs Act of 2017. The tax attorneys at Rosenberg Martin & Greenberg LLP in Baltimore note that the IRS did not issue guidance for Section 199A issues until mid-January 2019. Taxpayers are…
Collection – Pre-Notice Levies: When the IRS Can Levy Before Notifying Taxpayers of Their Right to a Hearing
This article was originally published in the Journal of Tax Practice and Procedure, December 2018 – January 2019 edition. A. Introduction One of the most important rights a taxpayer has during the Internal Revenue Service (“IRS”) administrative collection process is to be notified of their right to a collection due process hearing before the IRS…