Texas Comptroller Routine Audit Procedures

This publication is intended as a general guide and not as a comprehensive resource on the subjects covered. It is not a substitute for legal advice.JUNE 2025 NOTICE OF ROUTINE AUDITHOW YOUR AUDIT WILL PROCEEDThe Texas Comptroller of Public Accounts has scheduled a routine audit of your business records. Our auditors will contact you to set up a mutually agreeable time for the audit. We audit many taxpayers regularly, so you shouldn’t feel that we have singled out your account.The law authorizes us to examine the books, records, papers and equipment of a business to determine if the correct tax was paid to the State.The Texas tax process involves several steps. After the Texas Legislature passes tax laws, the Comptroller of Public Accounts is responsible for implementing and administering those laws. During implementation of these law changes, which could include the development of tax systems and training of staff, the Tax Policy Division develops policy in the form of rules, special publications and letters. Audits will be conducted for both assessments and refunds for all periods within the statute of limitations and audit fieldwork will be held to strict deadlines. Our auditors are accounting professionals familiar with the application of Texas tax laws to your business. The auditor will conduct an impartial examination of all necessary records. While the audit is in progress, the auditor will answer any questions that may arise. When the audit is completed, the auditor will explain the procedures available to you if you disagree with the results.THE AUDIT PROCESSOnce an audit is assigned, the division will automatically send an audit notification letter and an audit questionnaire to the entity selected for audit. Once the completed questionnaire is returned to the auditor, the auditor will contact the taxpayer within two weeks. If the audit questionnaire has not been returned to the auditor within thirty (30) days, the auditor will contact the taxpayer to request the questionnaire and schedule an appointment for the entrance conference. If the taxpayer does not return the questionnaire, or if contact cannot be made, a liability may be established by the best available method, including estimation. Like audits, refunds should be assigned to an auditor within 120 days of receipt of the claim from the taxpayer or another division within the agency. Once assigned, the taxpayer should be contacted by the auditor within thirty (30) days after the assignment of the refund. Texas Comptroller of Public AccountsWe a udit many taxpayers regularly, so you shouldn’t feel that we have singled out your account.

NOTICE OF ROUTINE AUDIT• • Under no circumstance should statute waivers be requested before the audit has been started unless the taxpayer is requesting an unusually long delay and the auditor is ready to start the audit. The request from the taxpayer to delay the start of the audit must be written and must include the reasons for the requested delay and the duration of the requested delay. In the past, some taxpayers have not allowed the auditor to begin a follow-up audit until the previous audit had been completed. If the fieldwork on the previous original audit has been completed and the previous audit has been billed or is in the pre-hearing, hearing, or amended audit stages, it is deemed to be complete. The current audit will no longer be delayed until the issue in the prior audit is resolved in the hearings process. MANAGED AUDIT PROCESSIf the taxpayer is planning to request a managed audit, the request must be submitted to the Audit Manager within sixty (60) days of the date on the Audit Notification Letter. Audit Division will approve or deny the managed audit request within thirty (30) days of the request. Once the request has been approved, thetaxpayer must submit a signed managed audit agreement, an audit plan describing audit procedures for each area in the audit, and an audit completion timeline to the auditor within forty-five (45) days of receiving the managed audit approval. Thereafter, taxpayers and the auditor should adhereto the approved timelines.Once the audit fieldwork and/or refund verification has been started, the goal is to complete the audit/refund in a timely manner with few interruptions.FIELDWORK AND TIMELINESOnce the audit fieldwork and/or refund verification has been started, the goal is to complete the audit/refund in a timely manner with few interruptions. Auditors are instructed to avoid period lapses longer than with no audit activity. If the taxpayerthirty (30) days has not provided the records necessary to complete the audit or refund, the auditor will issue the taxpayer a request in writing listing the specific records needed to perform the audit/refund and giving the taxpayer thirty (30) days to produce the records. If the records are not provided within the requested time then the audit will be estimated and/or the refund will be denied. If the taxpayer requests an extension of time and the request is reasonable, a second thirty (30) days or reasonable time not to exceed ninety (90) days, at the sole discretion of the auditor, can be given. A second extension request should not be granted unless the taxpayer has experienced a problem or hardship that the auditor deems to be beyond the taxpayer’s control. All extension requests from the taxpayer and extensions granted by the auditor must be documented in writing to avoid any misunderstandings or confusion.Once all records have been provided, the auditor should work continuously on the assignment until completed. Sometimes, there is a continuing disagreement between a taxpayer and the state, and the audit may go through the Administrative Hearings process as well as District Court. In the past, some contested issues have taken months, if not years, to reach conclusion. The underlying goal of these deadlines is to keep issues moving toward a timely resolution.EXAMINATION OF RECORDSTo perform an audit, the auditor must examine certain records. These may include but are not limited to:Sales invoices;Purchase invoices for supplies;

NOTICE OF ROUTINE AUDIT•Capital asset invoices and journals;• • • • • • • • • Current files of resale and exemption certificates;Accounting books, general ledgers, other ledgers and subsidiary journals;Charts of accounts and financial statementsreflecting profit and loss;Federal income tax information;Bank statements;Working papers and accounting data used to prepare tax reports;Computer records;Documentation supporting unaudited refunds; andDocumentation supporting credits taken onreturns.Often, the size and complexity of a business determines what records will be examined during the audit. Therefore, the law requires the taxpayer to furnish all records requested by the auditor that are necessary for conducting a complete audit.AUDITING METHODS: DETAILED VS. SAMPLINGGenerally, the auditor will first examine a portion of the business records to determine if there are errors in compliance with tax laws.If errors are found, the following types of audits can be performed:DETAILED AUDITThe auditor will examine all business records for the entire audit period.SAMPLE AUDITThe auditor will use sampling methods by which errors found in representative samples of business records are projected throughout the entire audit period. Sampling provides accurate results at a significant savings of time and manpower for both the taxpayer and the State. ESTIMATIONIf records are inadequate or not provided, the audit will be based on the best information available.COMPUTER AUDITINGIn performing tax audits, auditors have various audit tools available, including computers and computer audit software. In addition to using hard copy records, the Comptroller’s office employs audit methods using any and all taxpayer data files. Performing computer audits enhances audit accuracy and saves time and energy for the taxpayer and the auditor.STATUTE OF LIMITATIONSThe statute of limitations is four years for all taxes due the State of Texas. The audit normally will cover the most recent four-year period. However, tax may be assessed for any period if:• • • A false or fraudulent return was filed with intent to evade the tax;A return was filed erroneously and the tax due would increase by 25% or more; orA return was not filed.QUESTIONS ABOUT YOUR ACCOUNTQuestions should be directed to the auditor who performs the audit and/or their supervisor or manager.If assistance is needed before the audit begins or if concerns arise during the audit, please contact the Comptroller’s audit office at the phone number listed on the attached cover letter.The law requires the taxpayer to furnish all records requested by the auditor that are necessary for conducting a complete audit.

Texas Comptroller of Public Accounts This publication is intended as a general guide and not as a comprehensive resource on the subjects covered. It is not a substitute for legal advice. WE’RE HERE TO HELP! If you have questions or need information, contact us: For more information, search our website at Texas Comptroller of Public Accounts 111 East 17th Street Austin, Texas 78711-1440 Sign up to receive email updates on the Comptroller topics of your choice at comptroller.texas.gov/subscribe/. In compliance with the Americans with Disabilities Act, this document may be requested in alternative formats by calling the appropriate toll free number listed or by sending a fax to 512-475-0900. 800-252-5555 911 Emergency Service/ Equalization Surcharge Automotive Oil Fee Battery Fee Boat and Boat Motor Sales Tax Customs Broker Mixed Beverage Taxes O-Road, Heavy-Duty Diesel Equipment Surcharge Oyster Fee Sales and Use Taxes 800-531-5441 Cement Tax Inheritance Tax Local Revenue Miscellaneous Gross Receipts Taxes Oil Well Servicing Tax Sulphur Tax 800-442-3453 WebFile Help 800-252-1381 Bank Franchise Franchise Tax 800-252-7875 Spanish 800-531-1441 Fax on Demand (Most frequently requested Sales and Franchise tax forms) -800-252-1382 Clean Vehicle Incentive Program Manufactured Housing Tax Motor Vehicle Sales Surcharge, Rental and Seller Financed Sales Tax Motor Vehicle Registration Surcharge 800-252-1383 Fuels Tax IFTA LG Decals Petroleum Products Delivery Fee School Fund Benefit Fee 800-252-1384 Coastal Protection Crude Oil Production Tax Natural Gas Production Tax 800-252-1387 Insurance Tax 800-252-1385 Coin-Operated Machines Tax Hotel Occupancy Tax 800-252-1386 Account Status Ocer and Director Information 800-862-2260 Cigarette and Tobacco 888-4-FILING (888-434-5464) TELEFILE: To File by Phone 800-252-1389 GETPUB: To Order Forms and Publications 800-654-FIND (800-654-3463) Treasury Find 800-321-2274 Unclaimed Property Claimants Unclaimed Property Holders Unclaimed Property Name Searches 512-463-3120 in Austin 877-44RATE4 (877-447-2834) Interest Rate Publication #96-146 • June 2025