The Mississippi Department of Revenue is the state agency responsible for the administration of the revenue laws necessary to fund public services for you and your fellow citizens. It is our goal that every taxpayer pays the correct amount of tax due according to state law. One step toward reaching that goal is to audit tax returns to verify the accuracy of the tax liability reported.
There are various reasons why you may be selected for audit. However, the most common reasons include random selection, frequent or consistent errors on returns, insufficient information on returns, and/or a discrepancy with comparisons to third party information. This publication provides a general overview of the audit process and what you can do if you disagree with the audit findings.
Please see Chapter 77, Title 27 of the Mississippi Code Annotated, and Title 35, Part 1, Chapter 01 of the Mississippi Administrative Code for a more detailed explanation of the law and administrative procedures of the Department of Revenue.
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A field audit takes place at your place of business, home, or other place (such as your tax preparer’s office) to inspect your financial records. All field audits will be conducted at a reasonable time and place. The auditor will make the initial contact with you concerning the audit. An appointment letter will advise you of the audit date and other general information. It is your responsibility to provide the auditor with records and other information necessary to determine your correct tax liability.
Generally, an audit covers a 3-year period of time. The statute of limitations provides that the Department is restricted in our review of your returns to a period of 36 months past the date the return was due or the date the return was filed (depending on the tax type being audited.) The statute of limitations only applies to filed returns. There is no statute of limitations for periods for which a return has not been filed.
The appointment letter includes notice that the Department is arresting, or stopping, the statute of limitations from the date of the appointment letter. This is necessary to establish a beginning date for the audit period. What this means to you is that we will audit returns filed on or after the date given in the body of the appointment letter. This date is generally 3 years prior to the date of the appointment letter.
The appointment letter will provide you with a general guideline of the documents and records that the auditor will need to examine. If the letter does not include specific records utilized by you that are critical in proving your tax liability, go ahead and have those records ready in order for the auditor to be able to complete the work on your audit as quickly as possible.
After performing the examination of your records, the auditor will provide you a copy of the audit work papers. You will have a reasonable amount of time to review these work papers, ask questions, and provide additional information, if needed. The time for this review is dependent upon the amount of records and complexity of the issues involved.
It is critical that you communicate any issues you may have concerning the audit with the auditor. You should address all questions concerning the audit, tax law, rules and regulations to the auditor and/or the auditor’s supervisor during the course of the audit.
Once a field audit is completed, the agency will send you a formal notice of the audit results. This letter is called the Notice of Assessment. In this case, the word “assessment” does not necessarily mean that you owe the state any money. The assessment may be a zero amount, a credit (overpayment) amount, or it could be the audit results show that you owe an additional amount of tax, penalties, and/or interest.
Many audits result in no change to the reported tax liability. This means that no additional tax was found due nor was an overpayment of tax found. The assessment will show zero tax due. In some cases, we will find that you have overpaid your tax. Your assessment letter will show a negative amount of tax due.
When an assessment of additional tax is found due, the assessment will show a positive amount; however, if you have already paid all or part of this assessment, the letter will show the additional tax assessed, a credit for the payment, and the balance due.
Once the Notice of Assessment is mailed or delivered to you, if tax is found due, you have 60 days from the date of the notice to pay the liability. You do not need to do anything if you agree with a no change or overpaid finding. If you only agree with a portion of the audit, you may pay that portion and protest the part you disagree with. It is advisable to pay the portion you agree with to avoid accruing additional interest and/or penalties.
The first step is to discuss the audit findings with the auditor. We encourage you to ask the auditor questions concerning anything that is not clear to you. If you cannot come to an agreement, request a meeting with the auditor’s supervisor where you will be given the opportunity to explain your position, ask questions, and provide any additional documentation to support your position.
If you still cannot agree with the audit results, you have 60 days from the mailing or hand delivery of the notice to appeal that assessment and request a hearing before the Review Board. Unless the Department determines that a delay will jeopardize its ability to collect the assessment, no action will be taken to collect the assessment until it is mailed or delivered to you and the 60-day period for appealing the assessment has expired.
The 60-day time period begins on the mailing date of the Notice of Assessment regardless of whether you are still in discussions with the auditor, and/or the auditor’s supervisor, or whether you are still gathering information to support your position. You will not be granted a hearing if you do not timely file the request.
Additional information for appealing to the Review Board can be found here.
Taxpayers and tax preparers are responsible for being aware of the Mississippi tax laws, rules and regulations. Access to this information is available online at www.dor.ms.gov. Taxpayers may also contact the Department if you have any questions about this information.
It is your responsibility to maintain books and records sufficient to calculate your tax liability. Some assessments for additional tax result from the lack of records and documentation to support revenue calculations and expense deductions. The law provides that when these records do not exist, the Department may use other information available to calculate your liability. Additional information related to record keeping and document retention can be found here.
It is your responsibility to provide the Department with your correct mailing address and contact information. Notices and assessments are sent to the most recent address on record. If mailed to this last known address, you are presumed to have received the notice or assessment.