Audits and the Process for Appealing an Audit

All taxes administered by the Department of Taxation are subject to audit. Below you'll find articles of use to you if you're scheduled to be audited. Hard copies of the documents are available for download as Adobe Acrobat files (.pdf).

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Audits/Preparing for an Audit

The auditor will first contact you to schedule a mutually convenient time, date and location for an audit. The auditor and you will agree to a date that will provide adequate lead time for you to prepare your accounting records. Most audits are performed at the business location, but may take place at the CPA/bookkeeper's office, in the owner's home, or at the Department of Taxation. This is normally based on the convenience of the taxpayer.

If the business is registered for Sales and Use Tax with the department the audit will usually cover the previous 3 years. If not registered, the audit can go back as far as 8 years. (NRS 360.355). A Modified Business Tax, if the business has employees or other Excise Tax audit is usually done in conjunction with a Sales and Use Tax audit. Be aware that if you register for Sales and Use Tax, you are not automatically registered for any other required Excise Tax.

For a Sales and Use Tax audit, depending on the type of business, you will need some or all of the following business records:

1. Copies of previously filed tax returns with any related reports or work papers used to fill them out.
2. Detailed general ledgers and a chart of accounts.
3. Monthly sales journals or registers.
4. Sales invoices.
5. Resale certificates and exemption letters collected.
6. Federal Income Tax returns for the years under audit.
7. All purchase invoices.
8. Cash disbursement journals or check registers.
9. Asset depreciation schedule or fixed asset schedule.
10. Bank statements or cancelled checks
11. Cash register "Z" tapes.
12. Other records the auditor may identify as the audit is performed.

Not all businesses need or have such extensive accounting records. The auditor can determine during the initial phone interview the nature and extent of the records required for your audit. The Nevada Revised Statutes require that a registered business keep their records for at least 4 years, 8 years if not registered. (NRS 372.735)

Upon completion of the audit, the auditor will explain the findings and the Department's appeal procedure in detail. The audit may result in additional tax owed a credit for over paying a tax liability, or no financial adjustment because the business is in full compliance of the tax law. After a supervisory review of the audit, a Notice of Deficiency or Credit along with a letter explaining how the audit was performed and the results of the audit will be sent to you. In addition a Petition for Redetermination form, a copy of the related statutes regarding your rights and responsibilities, and a return envelope will be included. The Notice of Deficiency will clearly show the due date for payment of any additional tax due or date to petition (appeal) the determination to avoid further penalties and interest. (NRS 360.350, NRS 360.400)

Our job is to educate the taxpayer and assure that businesses comply with tax law. Every business and taxpayer is required to pay their fair, legal share of the tax. You should also know that auditors cannot be evaluated based on the amount of tax recovered during an audit. (NRS 360.145)

• Preparing for an Audit

The Process for Appealing an Audit

Whether it's an unexpected tax answer, audit billing, a deficiency or other notice, we will make every effort to clarify our position on the issue (NRS 360.291).

The Department's appeal process starts informally and becomes more formal as the issue is raised to a higher authority.

1. First, contact should be a telephone call to the auditor or revenue officer who is handling the case and ask them to explain the assessment and the relevant legal authority.
   
2. If further questions remain or if further clarification is necessary, ask to speak with the employee's team leader or supervisor.
   
3. If you are questioning an audit assessment or deficiency determination, complete the Petition for Re-determination form and return it in the envelope provided. This form must be returned to the Department within 45 days from the date of the Deficiency Determination or Notice of Credit. This 45 day due date is clearly stated on all notices. Failure to file the Petition for Re-determination timely may result in the determination becoming final and you will be considered to have waived your appeal rights. The Petition for Re-determination sets forth the amount of the determination being contested and the grounds for seeking it (NRS 360.365, NRS 360.360).
   
4. The Petition Supervisor will review the Petition for Re-determination and the facts surrounding the case. If there is additional documentation not previously presented to the auditor or revenue officer, the matter will be referred back to the original employee for consideration.
   
5. If there is still a disagreement with the assessment and there is no additional information to present, the matter will be forwarded for an evidentiary hearing, known as an Oral or Administrative Hearing, before an Administrative Law Judge (NRS 360.370). Hearings are scheduled in Las Vegas, Carson City, Reno or Elko; whichever is appropriate. Go to our Hearings page for more information concerning Administrative Hearings.
   
6. If you disagree with the decision of the Administrative Law Judge, you may appeal the decision to the Nevada Tax Commission (NRS 360.390). The Notice of Appeal must be filed within 30 days of the issuance of the Hearing Decision. The hearing before the Tax Commission will take place in Reno, Carson City or Las Vegas. Department policy requires that a representative from the Attorney General's Office represent the Department. You may represent yourself or seek outside assistance. For more information about hearings before the Nevada Tax Commission go to our Hearings page.
   
7. If you are not satisfied with the decision of the Nevada Tax Commission, you may appeal within 30 days to the appropriate District Court of the State of Nevada (NRS 360.395, NRS 360.390).

• Appeal Procedures