Audit Procedures

Below is a step by step explanation of how the audit process works:

1. Schedule the Audit: An auditor will contact you to arrange a convenient date, time, and place for the audit. This gives you ample time to get your financial records in order.
2. Audit Location: The audit can take place at your business, your accountant’s office, your home, or even at the Department of Taxation – wherever is most convenient for you.
3. How many years can you be Audited for?
   • For businesses registered with the Department for Sales and Use Tax, the audit typically looks at the past 3 years.
   • If not registered with the Department, the audit can go back as far as 8 years. See NRS 360.355.
   • A Modified Business Tax audit, 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.
4. Preparing Your Documents: Nevada law requires registered businesses to keep records for 4 years, or 8 years if unregistered. See NRS 372.735.
5. You might need to provide:
   • Prior tax returns and related documents.
   • Detailed general ledgers and sales journals.
   • Sales invoices, resale certificates and exemption letters.
   • Federal Income Tax returns for the audit years.
   • Purchase invoices and cash disbursement journals or check registers.
   • Asset depreciation schedules or fixed assed schedules, and bank statements or cancelled checks.
   • Cash register “Z” tapes and other relevant financial records.
   • The auditor will determine what’s needed during a preliminary call.
6. Upon Completion of the Audit: Once the audit is done, the auditor will review the findings with you, covering any extra taxes due, credits for overpayments, or confirmation of compliance with tax laws with no financial adjustment.
7. Final Documentation: A supervisory review then follows to validate the audit’s results. You’ll get a Notice of Deficiency or Credit 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 (in case you wish to appeal), a copy of the related statutes regarding your rights and responsibilities and a return envelope. 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. See NRS 360.350, NRS 360.400.

Our aim is to educate the taxpayer and assure that businesses comply with tax law, making sure every business and taxpayer pay their fair, legal share of the tax. Importantly, auditors are evaluated not by the tax amounts they collect but by their adherence to fairness and the law. See NRS 360.145.