Tax audit

Got notified Friday afternoon that my business has been picked for a Minnesota sales tax audit for the past 3 years.
Has anybody gone thru this process and what is it like?

Yep they will go thru all your receipts and make sure you paid sales tax on everything you were supposed to. They always find something and you always end up paying something. I try to do my own pre audit ahead of time.

Yup. MN Revenue is taking a look at all businesses. It’s a five-year plan. Send me a pm if you want more information.

My neighbor has been getting this audit for 3 years in a row now too. He’s not happy. He’s a small business owner who does everything by the books, but not being a tax accountant, he still misses stuff. I can’t remember how many hours it takes him, something like 80+ ish.

The gal I talked to said it will take 2 days.

Expect them to look hard at things like milage, and business in the home deductions. They also like to see if they can find evidence you haven’t reported all your income. Depending on what kind of business it is, they will adjust what they focus on, looking for issues that commonly come up in an audit. Have whoever did your taxes present at the audit, and remember not to volunteer any information. In my case, I was told we were not allowed to deduct travel expenses for myself when I flew to Las Vegas with my wife to work 24hrs in 2 days at a convention she was selling product at for her business. Turns out a business can only pay for a spouse to travel if they are on the books as an employee, and get paid as an employee with the IRS having records of that. The fact I worked most of my waking hours didn’t matter.

Good luck!

I’ve gone through two sales tax audits in 22 years. They will look to make sure you paid sales tax on everything you purchased as well as use tax. Then they will make sure you paid the correct amount of sales tax charged to your customers. The biggest thing they got me on is not charging the correct sales tax rate from city to city. Each city or county may have additional tax that should be charged. They even looked at PayPal accounts and got me on not paying use tax from stuff I had purchased online. First guy that did my audit was decent. The second was a complete A hole. They will find something.

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Expect them to look hard at things like milage, and business in the home deductions. They also like to see if they can find evidence you haven’t reported all your income. Depending on what kind of business it is, they will adjust what they focus on, looking for issues that commonly come up in an audit. Have whoever did your taxes present at the audit, and remember not to volunteer any information. In my case, I was told we were not allowed to deduct travel expenses for myself when I flew to Las Vegas with my wife to work 24hrs in 2 days at a convention she was selling product at for her business. Turns out a business can only pay for a spouse to travel if they are on the books as an employee, and get paid as an employee with the IRS having records of that. The fact I worked most of my waking hours didn’t matter.

Good luck!

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MN Sales Tax Audit…won’t get into that type of information.