The Office of Tax and Revenue routinely audits returns to ensure that taxpayers comply with District statutes. If your return is audited, you will be required to substantiate the information listed on your tax return.
Audits are done by mail or through personal interviews with auditors or tax specialists. You have the right to request that the audit be conducted at a time and place convenient for you and the auditor.
You are entitled to a fair audit and an explanation of any changes we propose to your tax return. You may represent yourself or have someone represent you when your return(s) are audited. You have a right to know which records you will need to verify or support, prior to any audit meeting.
The auditor will inform you of the types of records you should have available and will explain the planned audit method and procedures. The audit will be conducted in a timely manner and the auditor will review the results with you.
You will receive written notice detailing any adjustments made to your tax return and any balance due or additional refund. We will provide you with a copy of the audit-work papers and explain your appeal rights. Audits do not necessarily result in additional taxes.
The following types of audits are administered by the Audit division:
- Sales and Use Tax
- Corporation Franchise
- Unincorporated Business Franchise Tax
- Individual Income Tax
- Partnership Tax
- Fiduciary Tax
- Employee Withholding Tax
- Personal Property Tax
- Hotel Occupancy Tax
- Gross Receipts Tax
- Wholesaler’s Alcoholic Beverage Tax
- Cigarette Tax
- Motor Fuel Tax
- Inheritance and Estate Tax
- Toll Communication Service Tax
- Commercial Mobile Service Tax
For more information on each of these types of taxes, please contact the Audit Division at (202) 442-6582.
Selection of Audits
Successful audit selection involves the application of expert judgment developed over the years by auditors from extensive work and educational experience. Some auditors have audit selection experience of combined audit with other tax types. Typically, the audit selection process is implemented through a variety of approaches. Listed below are some of the audit selection approaches used to select a single or combined audit:
- Review of prior productive audits
- Other selection methods like pre-audit, adjustment review, and kick-out refund request
- High-priority accounts that are routinely audited on a cyclical basis
- Personal observation
- Random selection
- Leads from other jurisdictions’ audits
- In-house reports, returns, and schedules
- Random selection within special groups
- Leads received from employees outside the Audit division, i.e. revenue officers
- Leads from newspapers, magazines, and trade publications
- Leads from information furnished by the IRS
- Leads from informers
- Cell classification systems
- Industrial segment audits
- Construction Survey(s)
- Nexus Audit Program
- Discovery Audit Program
- Pilot Audits in targeted industries (market segment)
When An Auditor Requests An Appointment
If an auditor requests an appointment with a taxpayer, the taxpayer should take a close look at the contents of the notice letter to determine the purpose of the audit request and to gather the requested documents. Depending on the type of audit to be performed, some of these documents for the applicable audit period may be evidence of any exempt status, copies of invoices, copies of canceled checks, and evidence of whatever deductions are claimed on the taxpayer’s schedules.
Required Documents If Selected for an Audit
Documents required to be provided by a taxpayer selected for an audit are normally based on the type(s) and scope of the audit to be performed. However, the following are some of the general documents that a taxpayer may be expected to provide:
- All purchases and invoices for the applicable audit period(s)
- All purchase invoices for capital assets for the applicable audit period(s)
- General ledgers for sales and purchases for the entire audit period(s)
- A copy of filed Personal Property tax return
- Copies of sales report/sales journal and/or worksheets used to compute the sales and use for the period under audit
- Copies of exemption certificates, etc.
- Copies of canceled checks
- Copies of exemption from tax documents
- Evidence of the deductions claimed on their income tax schedules