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 decline. As a result, more 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 for navigating through the mud:
Relax. Relate. Release. Take the time to read and understand the details of the audit letter. Suppress the urge to be overwhelmed by the scope and severity of the audit and instead focus on meeting the deliverables.
Contact the Assessor’s Office immediately. This tax issue will not go away if it is ignored. Try to speak briefly with the assessor or auditor who will handle your case. Let the auditor know that you are receiving the letter and try to comply with their requests in a timely manner. Explain any changes in status, ownership or location of the business at this time.
Talk 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 on this specific tax matter. If your accountant is not well versed in business personal property tax law, you may want to consider a tax advisor who specializes in this area. A qualified personal property tax consultant can mitigate or reduce the total amount of back taxes, interest, and penalties owed.
Submit all required documentation quickly and in an orderly manner. If an auditor has to choose between examining 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? Facilitate the auditor’s work by submitting the required information on time and in an orderly manner. Provide all mandatory documentation; but, only provide optional information at your own discretion. Federal and state income tax returns are generally 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 corroborate all audit findings. It is prudent for the auditor to explain the results of the audit to you so that you understand their financial implications. Most counties / localities give the taxpayer the ability to agree or disagree with the results of the audit. Be prepared to provide documentation to corroborate why you disagree with the audit results. The Tax Assessor’s Office will mail a notice of appraisal change if the audit produced a positive or negative change in tax value. This notice explains your right to appeal the new assessed value in writing within a specified time period. If the appeal deadline is not met, you will lose 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 of your business being selected for audit.