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2315, Taxpayer Rights During an Audit

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The Appeals Process Non-Payment of Tax Balance Taxpayer IdentificationMichigan Department of TreasuryTaxpayers have the right to the following: Failure to make payment in full or to enter into It is important to include the correct name and an approved arrangement will initiate Social Security number or Federal Employer Informal Conferencecollection action by Treasury. Collection action Identification Number on all correspondence and 1. An informal conference may be requested in will not be taken before appropriate notice has payments to Treasury. writing to Treasury within 60 days of the date on been given and due process has been provided. the Notice. The following information must be Taxpayer Rights The collection process may be stopped at any time Contact Informationincluded in the request: by paying the balance in full or entering into an During an Audit• The amount of tax disputed Treasury makes every effort to make tax forms and approved payment arrangement. Treasury may • An explanation of the complaint instructions clear and easy to follow. Forms are Working Togethertake collection action to secure payment of the • Payment of the undisputed portion of the tax available at www.michigan.gov/taxes. debt, including:bill.For questions about tax debts that have been Liens: Treasury will file liens on real and personal 2. A conference with an impartial referee will be assessed, taxpayers should contact the Collection Tax audits are performed to ...
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The Appeals Process Non-Payment of Tax Balance Taxpayer Identification
Michigan Department of TreasuryTaxpayers have the right to the following: Failure to make payment in full or to enter into It is important to include the correct name and
an approved arrangement will initiate Social Security number or Federal Employer Informal Conference
collection action by Treasury. Collection action Identification Number on all correspondence and 1. An informal conference may be requested in will not be taken before appropriate notice has payments to Treasury. writing to Treasury within 60 days of the date on
been given and due process has been provided. the Notice. The following information must be Taxpayer Rights
The collection process may be stopped at any time Contact Informationincluded in the request:
by paying the balance in full or entering into an During an Audit• The amount of tax disputed Treasury makes every effort to make tax forms and
approved payment arrangement. Treasury may • An explanation of the complaint instructions clear and easy to follow. Forms are Working Togethertake collection action to secure payment of the • Payment of the undisputed portion of the tax available at www.michigan.gov/taxes.
debt, including:bill.
For questions about tax debts that have been Liens: Treasury will file liens on real and personal 2. A conference with an impartial referee will be assessed, taxpayers should contact the Collection Tax audits are performed to verify that property to protect the interest of the State. Liens established at a date and place that is convenient Division at (517) 636-5265 or contact the a taxpayer has properly accrued and will be filed regardless of whether an approved for all parties. Taxpayers may bring an attorney or appropriate tax unit below. paid all applicable taxes. Statutory payment arrangement is in place. Liens become appoint a representative in their absence. Hearings authority to conduct audits for the
a public record and may affect the credit rating Individual Income Taxes (517) 636-4486may be recorded with prior notification. taxes administered by the Michigan
of the taxpayer. In most cases, property cannot be Michigan Business Tax (517) 636-4657 Department of Treasury (Treasury) 3. The referee will make a recommendation
sold or transferred until the past-due tax is paid Motor Fuel Taxes (517) 636-4600 is provided in Section 205.3a of the to a Treasury Executive who will issue a final
and the lien is released. Sales, Use, and Revenue Act, Public Act 122 of 1941.decision.
Withholding Taxes (517) 636-4730Wage Levy: A wage levy requires a specific
Treasury auditors are expected to Tax Tribunal or Court of Claims Single Business Tax (517) 636-4700deduction from a taxpayer’s compensation to be provide:The final decision from the informal conference or applied toward the past-due debt. A filing fee of • Prompt, fair, and courteous servicea Final Assessment may be appealed to either: Taxpayers experiencing difficulty in resolving tax $55 will be added to the delinquent amount due for • Confidentiality.• The Michigan Tax Tribunal within 35 days, matters may contact the Taxpayer Advocate Office each levy served.which requires payment of the undisputed by writing to: Taxpayers have a responsibility to:Financial Institution Levy: Treasury may serve amount, or
• File returns on time with the correct Taxpayer Advocate Officea levy against a taxpayer’s account(s) at financial • The Court of Claims (Ingham Circuit Court) payment (if necessary).Michigan Department of Treasurywithin 90 days, which requires payment of the institutions which requires the financial institution • Make sure returns are correct, Lansing, MI 48922full amount of the assessment. to send Treasury any funds up to the total past due regardless of who prepares them.
balance. A filing fee of $55 will be added to the • Provide documentation as requested Decisions of the Tax Tribunal or the Court of
delinquent amount due for each levy served. to complete an audit or review.Claims may be appealed to the Court of Appeals
For complete information, visit:and ultimately to the Michigan Supreme Court. Offsets: Treasury may offset any income tax
This brochure is intended to help clarify refunds or payments owed to a taxpayer by the www.michigan.gov/taxes taxpayer rights and responsibilities; it
State and apply it to the debt. does not take the place of the law.
Other Actions: Treasury has the authority to take
For complete information, visit:immediate action to freeze assets and restrict the
www.michigan.gov/taxestransfer of property.
2315 (Rev. 10-10)
Published under authority of Public Act 13 of 1993.3. If the audit results determine that the taxpayer is to the taxpayer. Audit work papers that substantiate General Audit Overview Audit Methods: Detail vs. Sample
entitled to a tax refund, a Final Audit Determination the audit determination will also be provided to the Generally, the auditor’s first step is to review the It is not possible to audit all of the taxpayers in Letter will be issued identifying the refund amount taxpayer. If the taxpayer is in agreement with the accounting, tax accrual, and reporting systems and Michigan with the limited resources that are available. Treasury believes is owed to the taxpayer. The letter evaluate the internal controls within each. If tax amount due, payment should be submitted by the Instead, computer-generated risk assessment models informs the taxpayer of any appeal rights. response date identified in the NOPAD. If the taxpayer errors are identified, either of two types of audits can are used to evaluate taxpayers for audit. disagrees with the amount due, the auditor should be be performed:The Audit ProcessIf a taxpayer is chosen for an audit, generally, an contacted immediately.1. Detail audit: The auditor may examine all interview or visit to the taxpayer’s business is Auditor 2. Final Audit Determination Letter: Approximately business records for the entire audit period.required. In some cases, the taxpayer may receive Section 205.3a of the Revenue Act authorizes the 60 days after receiving the NOPAD, a Final Audit examination of the books and records of a taxpayer 2. Sample audit: The auditor may use sampling a tax audit questionnaire and a request to submit Determination Letter will be issued. If the taxpayer to determine if the correct tax was reported and paid. methods. Errors found in representative samples of copies of certain records by mail in advance of the did not submit payment after receiving the NOPAD, business records are projected over the entire audit audit start date. This is done to give the auditor a Treasury auditors are professionals, familiar with a Notice of Intent to Assess (Notice) will be issued. the application of Michigan tax law in the business period. Sampling provides accurate results with better understanding of the business activities which, If the taxpayer disagrees with the liability amount, environment. The auditor assigned to an audit will significant savings of time and manpower for the in turn, can minimize the time needed to complete the a written request for an informal conference may be State and the taxpayer.audit. Taxpayers have the right to: conduct a fair and impartial examination of the submitted to Treasury within 60 days of the Notice taxpayer’s records. While the audit is in progress, the In either method, if the records are inadequate, the • Ask that the audit take place at a reasonable time date (instructions are provided on the Notice for auditor will answer any questions that may arise. When audit is based on the best information available.in a convenient location. requesting an informal conference). If the audit
the audit is finished, the auditor will explain the audit • Represent oneself, have someone accompany him results in a refund and the taxpayer disagrees with Statute of Limitationsfindings and the alternatives available to the taxpayer or her or, with authorization, have a third party the determination, instructions are provided on the Generally, the statute of limitations is four years for if the taxpayer disagrees with the audit results. represent the taxpayer in his or her absence. Final Audit Determination Letter for requesting an the taxes administered by Treasury. An audit normally Examination of Records• Receive copies of the audit work papers that show informal conference.covers the most recent four-year period. However,
To perform an audit, the auditor must examine certain how the auditor determined any changes to taxes tax may be assessed for any period if a return was 3. Bill for Taxes Due (Final Assessment): Sixty records. These may include, but are not limited to:due or applicable refunds. not filed. days after the Notice, Treasury will issue a Bill for • Sales invoices• Meet with the auditor or the auditor’s supervisor Taxes Due unless the amount due is paid in full, an Questions• Purchase invoices for suppliesto discuss the audit findings. informal conference has been requested, or Treasury The taxpayer should direct questions to the auditor • Capital asset invoices and journalsDuring the course of the audit, the auditor must adhere has received information to correct the amount due.who performs the audit. If assistance is needed • Resale and exemption certificates
to the following provisions of the Jobs Provider Bill before the audit begins or if concerns arise during the • General ledgers, subsidiary ledgers and journals, Paying the Taxof Rights: audit, the taxpayer should contact the auditor or the and supporting books and records Payments may be made any time during the billing
1. Notify the taxpayer in writing of any refund auditor’s supervisor or manager.• Tax returns process. If full payment cannot be made, a payment
opportunity the auditor may have identified. The • Bank statements arrangement may be requested from the Collection
taxpayer may then claim that refund under the Confidentiality• Work papers and accounting data used to prepare Division.
provisions of the Revenue Act. Neither the auditor nor Treasury employees honor a taxpayer’s right to tax returns Penalty and InterestTreasury is required to provide detailed transactional confidentiality. Except where required by law, • Electronic records. Interest and/or penalty will apply as long as there is support for refund claims or to perform any review taxpayers must authorize the disclosure of tax The size and complexity of a business determines the a tax balance due. Penalty on an assessment may beyond that necessary to satisfy the intended scope information to any third party before it can be scope of the audit and what records will be examined be waived if reasonable cause for failure to pay on of the audit. released. To authorize, use the Power of Attorney during the audit. time is demonstrated. Reasonable cause may be (Form 151), available on Treasury’s Web site.2. A taxpayer subject to a use tax audit of purchases serious illness or death, a fire or natural disaster, The Revenue Act requires taxpayers to furnish all may offset the use tax liability determined in the audit or criminal acts against the taxpayer. The penalty records requested by the auditor that are necessary Notification of Audit Determinationby the sales tax paid annually to Michigan vendors in waiver will apply only to periods directly affected for performing a fair and impartial audit. 1. Notice of Preliminary Audit Determination: error or the use tax paid annually to vendors outside by the circumstances. Waiver requests must be made
Treasury auditors employ methods that use electronic Treasury will send a Notice of Preliminary Audit Michigan in error on an amount up to $5,000 in in writing. Refer to Revenue Administrative Bulletin
Determination (NOPAD) that identifies either the tax, or computer-readable data files. Using records in purchases. 2005-3 Penalty Provisions for additional details.form is accurate and generally interest, and penalty amount due or any refund owed
results in reduced audit time.