Tax Audit Attorney Serving Jersey City and all of New Jersey
Like the IRS, NJ tax audits can be a lengthy, stressful process. This is only exacerbated because the state will sometimes examine 4 years of returns, as opposed to the 3 years the IRS generally examines.
NJ will utilize various audit techniques in an NJ tax audit depending on the business, the type of tax, and the quality of records you have. If your records are poor or nonexistent, NJ will use an indirect method to determine your tax liability. This essentially means NJ will make a guestimate of the amount of money you made and expenses you incurred and will tax you accordingly.
If you tried to handle the initial audit yourself and were unhappy with the results, there are appeal rights that can challenge the state’s conclusions. It’s imperative appeals are filed properly and timely. If not, your only remedy may be to pay the liability in full and engage in costly battle for NJ to refund your money.
NJ Audit FAQs
Why Am I Being Audited?
There’ are a few reasons you could have been selected for audit:
- It could be random.
- There could be unusual items on your tax returns, such as a category with unusually high expenses.
- If you filed an amended return with a claim for refund, it can increase your chances of an audit.
- A third party you use—such as a vendor or customer—could have been audited leading to a review of your business.
- New Jersey could be focusing on your specific industry.
- The Ex-factor: an ex-spouse, ex-business partner, or ex-employee could have provided information stating returns were filed inaccurately.
Do I Need to Meet with the Auditor?
Usually your attorney or authorized representative will handle all face-to-face meetings, phone conferences, and correspondence with New Jersey. It’s very rare a taxpayer must be interviewed.
What Kind of Documents Will New Jersey Request During an Audit?
In most audits, New Jersey will request:
- All federal and state income tax returns
- All federal and state payroll tax returns
- State sales tax returns
- General ledger
- Form 1099s
- Bank statements
Once the auditor reviews the return, she will usually ask for additional information via an Information Document Request. The auditor is seeking to spot check a few line items on the returns. For instance, if you deducted supplies, they may request backup documentation such as cancelled checks and receipts to substantiate the deduction on the return.
What Are Some Common Things NJ Auditors Look For?
NJ Auditors will make sure all returns have been filed. In addition, they will compare the sales tax returns to the income tax returns for discrepancies in the gross receipts stated.
Contact a New Jersey Tax Audit Lawyer!
While you may be tempted to handle an audit yourself, it’s almost always a good idea to hire representation. We have experience handling NJ audits for various times of businesses and individuals. For help with NJ Tax Audits, contact me today.