Personal Property Tax Audits in Jefferson County, Alabama

Introduction

Personal property audits are conducted to verify that personal property has been properly reported and assessed. The authority to conduct audits comes from § 40-7-21 of the Code of Alabama, 1975.

The auditors

Personal property tax audits are performed year round by members of the Alabama Department of Revenue and Deputy Tax Assessors of Jefferson County. In addition, some audits conducted on companies whose home offices are located outside Alabama may be performed via a contract with private firms. All auditors undergo training in assessment and have an accounting background with years of experience in the accounting field.

Reasons for an audit

Reasons for beginning an audit vary but are usually the result of Personal Property Returns that appear unusual or incomplete as to what property a business might be expected to have. An accounting firm is expected to have computers and a tow truck operator is expected to have trucks. Equipment is expected to wear out and so having very old equipment listed year after year would be cause for an inquiry. Individual assets listed at zero or very low cost or a low total cost of assets are also reasons an audit could be generated.

Stages of an audit.

1. Pre-onsite stage - before the audit date. The notice is sent to the taxpayer and the taxpayer collects the documents listed for the auditor to review. If documents are in storage, they must be removed from storage. At this time the taxpayer should discuss any problems or questions with the auditor concerning data requirements. If the date on which the audit is scheduled will cause a hardship (travel plans already made, surgery scheduled, etc.), call the auditor, explain the situation and request another audit date.
2. Onsite stage - the day of the audit. The auditor visits the business. The auditor asks questions about the business and its accounting practices, conducts a walk around of the business and examines the documents. Under some circumstances the auditor may ask the taxpayer to mail the documents to him instead.
3. Review stage. The auditor reviews the audit notes at his office. The auditor may have follow up questions.
4. Notice stage. A notice of preliminary findings is sent to the taxpayer. If there is an additional assessment, the taxpayer has 20 days to respond in writing with a protest. If no protest is received, the auditor sends a letter to the Tax Collector who issues a bill.
5. Protest stage. The auditor and taxpayer iron out any differences if possible. The auditor is not under any requirement to come to an agreement with the taxpayer. If the taxpayer and auditor can agree the audit is final and the auditor sends a letter to the Tax Collector who issues a bill.
6. Final stage. A final assessment letter is sent to the taxpayer. The auditor sends a letter to the Tax Collector who issues a bill. The taxpayer has 30 days to take the assessment to the Board of Equalization or Circuit Court. At this stage professional help will probably be needed. The law is ambiguous. Fighting an assessment is expensive. The burden of proof is on the taxpayer.

Audit tips.

• Have all the documents ready on the day of the audit.
• Ask the auditor about anything that you do not understand.
• Treat the auditor like you would like to be treated.
• Discuss differences in a courteous manner.