What to Expect During an Audit of Your Tennessee Taxes

When facing a tax audit in Tennessee, preparation and understanding the process can greatly ease the stress involved. Here’s what to expect during an audit of your Tennessee taxes, which can help you navigate this experience more effectively.

1. Notification of Audit
Tax audits in Tennessee typically begin with a formal notification from the Tennessee Department of Revenue. This notification outlines the specific years being audited and the reason for the audit, whether it’s a random selection, discrepancies in your tax return, or another trigger. It’s crucial to read this notice carefully to understand the scope and prepare adequately.

2. Types of Audits
Tennessee tax audits can be categorized into three types: correspondence audits, office audits, and field audits.
• Correspondence Audits: These are conducted via mail and usually involve simple issues that can be resolved through documentation sent back and forth.
• Office Audits: Conducted at the Department of Revenue’s office, these audits require you to bring specific documents and records pertaining to your tax return.
• Field Audits: These involve the auditor coming to your business or home to review records in person, which can be more comprehensive and time-consuming.

3. Preparation of Documentation
Gathering relevant documentation is essential. Expect to provide records such as W-2s, 1099s, bank statements, receipts, invoices, and any other papers that support the claims made on your tax return. Organizing these documents before the audit can streamline the process and demonstrate your diligence to the auditor.

4. The Audit Process
During the audit, the auditor will review your tax documents, clarify points of confusion, and ask questions related to your tax filings. Be prepared to explain your financial activities clearly. It’s imperative to be honest and straightforward in your responses to avoid any potential legal complications.

5. Outcomes of the Audit
After the completion of the audit, the auditor will present their findings. Possible outcomes include:
• No Change: Your returns are validated, and no further action is necessary.
• Additional Taxes Owed: If discrepancies are found, you may owe additional taxes. The auditor will provide a detailed explanation.
• Refund: In some cases, the audit may reveal that you have overpaid, leading to a refund.
It’s essential to carefully review any findings and consider consulting a tax professional if you disagree with the results.

6. Appeals Process
If you disagree with the results of the audit, you have the right to appeal. Tennessee law allows taxpayers to contest the auditor's findings through an administrative appeal process. Documentation and clear communication are critical during this phase.

7. Importance of Professional Guidance
While some taxpayers choose to represent themselves during an audit, hiring a tax professional with experience in Tennessee tax law can provide invaluable support. A tax expert can help you prepare your documentation, represent you during the audit, and advise you on the best course of action regarding findings.

Understanding what to expect during a Tennessee tax audit can alleviate anxiety and increase the likelihood of a favorable outcome. Thorough preparation and knowledge of your rights are essential for successfully navigating the audit process.