Business Tax Audits

If you do business in Maryland, you need to know what to expect if you're ever audited by the Comptroller's Office. Some audits are triggered by information on tax returns, but others are done randomly. The Comptroller's Office will call or write taxpayers to schedule audits. Maryland businesses will receive about a week's notice, while out-of-state businesses will receive more time to prepare. The Comptroller's Office is flexible about scheduling audits; however, businesses asking for lengthy postponements may need to sign an extension of limitations for the period of time covered by the audit.

Only if we can't contact you by phone or letter will an auditor stop by your business to schedule an audit. During this initial contact, the auditor will ask general questions about the business and schedule an appointment to start the audit. You will also be asked to have certain records available to start the audit. In addition, the time period subject to the audit will be discussed.

The audits usually begin with you having an opening conference with the auditor. The auditor will ask for a brief description of the business steps involved in making products, in sales, or in providing services and will ask how the business accounts for the taxes involved in the audit. You may want to take the auditor on a tour of your business or facility, so that he or she will better understand how all of the various components of the business relate to the records.

Very few audits involve a complete review of all the records in the audit period. Records are reviewed for a sample period usually agreed on by you and the auditor. Don't let the request for records overwhelm you, but don't wait until the day of the audit to start to gather the records, either. Try to have as many of the requested records available on the first day of the audit. If you're having problems gathering the records you need be sure to gather information to get the audit started. Taxpayers are often granted extra time to gather records that are in storage.

If you have a problem finding a particular record we've asked for, talk to the auditor about it. They'll try to work with you to complete the audit as easily and efficiently as possible.

When the audit is completed, the auditor will hold a closing conference with you, and you will receive a complete copy of the auditor's working papers. During the conference, be sure that you understand everything on the audit working papers. Remember, not every audit results in a tax assessment, so the audit results may be good news.

You should feel free to disagree with the results. If you and the auditor can't resolve the disputed issues, the auditor will tell you how to appeal the audit. The first appeals step for most tax types is an administrative hearing, followed by an appeal to the Maryland Tax Court if the issues aren't resolved in an administrative hearing.

To learn more about your rights during the audit and appeals process, you can see the section, Your rights as a Maryland taxpayer. You should also review the section, What sales records do I need to keep? (Tax Tip was rewritten) Copies of literature can be requested through our Forms-by-Fax system at 410-974-3299 (ask for item 3003 on index 2).