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Paying taxes is an important part of running a business. As a business owner in Texas, you are required to file taxes with the state franchise tax board every year. Texas franchise tax audit is a process that the state uses to ensure that you are paying the right amount of franchise taxes. Although the process of being audited can seem daunting, it is best to be prepared and understand the basics of Texas franchise tax audit. This article will discuss the basics of Texas franchise tax audit and what to expect during an audit.

What is Texas Franchise Tax Audit

Franchise tax audit is a process whereby the state verifies that businesses are correctly reporting their franchise tax liability and that they are following the state’s tax laws. The audit process of Texas franchise tax can be conducted by the Comptroller’s office or by a third-party contracted by the state. When you receive an audit notification, it means that your business activities in Texas are under review.

What Triggers Texas Franchise Tax Audit

Some factors can trigger a Texas franchise tax audit, including irregularities in your business tax returns, unusual deductions, or claims of credits. Additionally, failure to file taxes or delay in payment for taxes can result in an automatic franchise tax audit.

What to Expect During Texas Franchise Tax Audit

Once you receive a notice of a franchise tax audit, the next step is to begin to prepare. You will need to assemble all your business records from the past year. You should also expect to meet with the auditor, either in person or through a teleconference. During this meeting, the auditor will verify the accuracy of the information you provided in your tax return.

Consequences of Texas Franchise Tax Audit

The result of the audit will determine whether you owe additional taxes and penalties or if you will receive a refund. As a result of the audit, you can either dispute the assessment or pay it entirely. If you dispute the decision of the auditor, you need to file an appeal within 60 days.

How to Prepare for Texas Franchise Tax Audit

You can prepare for a Texas franchise tax audit by keeping detailed records of your business and financial activities. Ensure that you can account for all your business income sources, deductions, and expenses. Also, you should be familiar with the Texas state franchise tax law and filing requirements.

Conclusion:

Paying franchise taxes in Texas is mandatory. Texas franchise tax audit ensures that businesses in the state are playing on a level playing field and paying their fair share in taxes. As a business owner in Texas, it is crucial to understand the basics of Texas franchise tax audit, as it can help you prepare for the process and avoid penalties and interests. By keeping accurate and detailed records, knowing the state franchise tax law, and being prepared for potential audit triggers, you can easily navigate the audit process and emerge successfully.