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Selected for a Business Personal Property Tax Audit – Now What?

The real estate implosion has been devastating to local government budgets. Property taxes, once the most stable source of local government revenue, are trending downward as property values decrease. As a result, a greater number of personal property audits are being conducted to generate much-needed revenue.

If your business has been selected for a business personal property audit in Georgia, here are some general guidelines to navigate through the mire:

Relax. Relate. Release. Take time to read and comprehend the specifics of the audit letter. Repress the urge to become overwhelmed by the scope and severity of the audit and instead focus on meeting the deliverables.

Contact the Assessor’s Office immediately. This tax matter will not go away if ignored. Try to speak briefly with the appraiser or auditor that will handle your case. Let the auditor know that you are in receipt of the letter and seek to comply with its requests in a timely manner. Explain any business status, ownership, or location changes at this time.

Speak to your accountant. By submitting a third-party affidavit or power of attorney to the Assessor’s Office, your accountant or CPA can act on your behalf in this specific tax matter. If your accountant is not well-versed in business personal property tax law, you may wish to consider a tax consultant that specializes in this area. A skilled personal property tax consultant may be able to mitigate or reduce the total amount of back taxes, interest, and penalties owed.

Submit all required documentation promptly and neatly. If an auditor has to choose between sifting through a shoebox full of receipts and handwritten notes, or receiving a well-organized set of financial statements, fixed asset listings, and inventory reports, which do you think the auditor would prefer? Make the auditor’s job easier by submitting the required information on time and in an orderly fashion. Provide all mandatory documentation; but, only supply optional information at your own discretion. Federal and state income tax returns are typically considered optional information for a personal property audit. Many audits have been expanded based on optional documentation submitted by an unsuspecting taxpayer.

Accept or appeal. The auditor is required to substantiate all audit findings. It is prudent to have the auditor explain the audit results so that you understand its financial repercussions. Most counties/localities give the taxpayer the ability to agree or disagree with the audit results. Be prepared to offer documentation that corroborates why you disagree with the audit results. The Tax Assessor’s Office will mail out a change of assessment notice if the audit produced a positive or negative change in tax value. This notice explains your right to appeal the newly assessed value in writing within a specified period of time. If the appeal deadline is missed, you forfeit the right to appeal the value.

Business personal property tax audits are on the rise. Protect your business and your bottom line by filing the required annual tax return. With strategic tax planning and compliance, you can minimize the risk that your business is selected for audit.

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