Many people, even though they are in full compliance when it comes to their taxes, feel a bit nervous at the word "audit." After all, who wants to worry about an oversight that could cost you? Many people do not realize that it goes both ways, and sometimes they pay too much.
Businesses can use a reverse audit to make sure that there are no over-payments on their side and to request a refund if there are over-payments. Expert tax advisors can help you make sure you are not missing out on any refunds your business is owed.
Where Should You Start Researching Your Reverse Audit?
First off, find out how far back the statute of limitations goes for your state’s tax reviews. Your reverse audit should cover the whole time permitted. A reverse audit should generally cover three to four years.
The payments you should review include, but are not limited to, materials for manufactured products, equipment used to make said products, equipment leases related to manufacturing, software, maintenance fees and service transactions. These are all areas that you may have overpaid in taxes.
Make sure you are claiming every single exemption you can. For example, in most places businesses are exempt from sales tax on equipment used in manufacturing or other types of industrial production. Utilities, chemicals and software related to industrial production are also exempt in many states. Also, your software, computers and related items may be exempt in your state if they are used for research and development.
Changes Matter When it Comes to Tax Exemptions
Note any changes, growth or downsizing. A simple change in business may mean savings you did not expect. Also, understanding your own business operations is key to claiming tax exemptions. To receive the certain maximum benefits, you need to know exactly where your manufacturing process begins and ends.
Contact our tax advisors at 952-893-9320 or learnmore@BoulayGroup.com if you have any questions or would like assistance in the arduous task of a reverse audit. It is worth the research due to the taxes you can save now and in the future. We can help you understand your state’s regulations and help navigate any paperwork to make the reverse audit process less complex.
File Download: Does Your Business Stand to Gain from a Reverse Audit?