Audit Division and the Fraud Penalty

In the theoretical world, the Texas Comptroller’s Audit Division serves several very real and legitimate purposes. Good state tax auditors conduct audits for tax compliance (as opposed to revenue generation).  Another purpose is to keep the playing field level for all taxpayers.

It is not right for business A to comply with the law while business B, a competitor of business A, ignores it or intentionally violates it.  When businesses choose or intend to violate the tax laws, the Texas Comptroller’s Audit Division has the option and the responsibility to punish the violator via the additional 50% penalty, also known as the Fraud Penalty.

Wes Boullioun – Former Texas Comptroller State Tax Auditor, 8 Years

Wes Boullioun – Former Texas Comptroller State Tax Auditor, 8 Years

Determining intent as opposed to unintentional mistakes is clear in theory, but far less clear in the real world. Many business owners are very good at what they do, but not so much at keeping records. And they certainly are not black belts in complex state tax laws. That is why the Audit Division has a real responsibility to be sure a taxpayer intended to defraud the State before the Comptroller imposes such a harsh penalty.

Unfortunately, most auditors have no real understanding of what it is like on the taxpayer’s side of the desk. And in the real world, many people who made errors but did not commit fraud are assessed the fraud penalty.  Frankly, most auditors are not qualified to determine intent.

Some cases, maybe even many, are black and white. And it doesn’t take a genius to figure out that if your inventory purchases exceed your reported receipts for forty straight months, then you are probably cheating. But if you have been assessed the fraud penalty and you DID NOT intend to defraud the State, the fraud penalty can be devastating on many levels. In such situations, you should call Texas Tax Group immediately and let our experienced team of former Texas Comptroller State Tax Auditors handle your case.

At Texas Tax Group we understand state tax audits are complicated.  We also know it’s frustrating to find out you have been doing things incorrectly…especially if it means you need to pay money you may not have in order to rectify the situation. However, having the stigma of “cheater” thrown on you only compounds an already terrible situation. And if you were bad at keeping records to the point that the State hit you with the fraud penalty, then you are probably helpless in defending yourself against the charge! Simply stating “I didn’t mean to!” will not get you out of hot water.

On a financial level, the name says it all – Additional 50% penalty. The financial consequences of being assessed an additional 50% penalty are devastating at best if not insurmountable to many businesses. You need help.

The burden of proof is on the Comptroller to show by the legal standard of clear and convincing evidence that a taxpayer intended to defraud the State before it can be upheld in court. There is a defense against the fraud penalty.

If you have been assessed the fraud penalty and you did NOT commit fraud, call us toll-free at 855-892-8348 for immediate assistance. We will do our best to set the record straight and save your business.