Is It Legal for Wa Dept of Revenue to Review Bank Statements During an Audit

A Taxpayer'due south Claiming to a Notice of Assessment past Washington's Department of Revenue, an Overview

Every person or entity that conducts business organization in Washington State may be audited by the Department of Acquirement. Generally, these audits occur without major problems or interruptions to the taxpayer'due south business activities. Still, when the taxpayer disagrees with the revenue agent's findings, what actions the taxpayer takes and if (or when) the taxpayer obtains representation from a lawyer or tax professional regarding the assessment can have a dramatic effect on the costs associated with resolving the dispute.

Beneath is an overview of the various avenues a taxpayer may utilize to challenge an cess, each avenues' implications, general strategies a taxpayer should consider, and considerations the taxpayer should consider when it decides whether to seek advice from a tax lawyer or tax professional.

Initial Actions after the Audit: Appeals Partition of the Department of Revenue.

At the decision of every audit, the revenue amanuensis will issue two documents to the taxpayer: the Notice of Assessment and the corresponding Auditor's Particular of Differences and Instructions to Taxpayer. With these two documents, the Department gives the taxpayer find of whether the agent institute a taxation deficiency, the legal and factual basis for the deficiency, and the taxpayer's statutory rights if it disagrees with the Notice of Assessment.

The 30 Day Appeal Notification

Critically, in one case the Notice of Assessment is issued, a taxpayer has 30 days from the date of issuance to appeal the Notice to the Appeals Division of the Department of Revenue. The xxx days, all the same may be reset if the taxpayer asks the amanuensis to reconsider discrete aspects of the Notice of Assessment. Regardless of whether the taxpayer seeks reconsideration, it must be mindful of the 30 solar day borderline. Failure to file a timely entreatment will cause the Notice of Assessment to become concluding.

Whether the taxpayer appeals to the Department'south Appeal Division or elects another avenue is relevant considering if the taxpayer does not file an appeal to the Appeals Division within the thirty day window, then the Notice of Assessment becomes final and the Department will begin the drove procedure.. Significantly, once an cess is deemed final, the Department has no other recourse but to begin the collection procedure.

Are Taxes Due During the Appeals Process?

If the taxpayer files a timely entreatment to the Entreatment Division of the Department of Revenue, so the taxpayer is non legally required to pay whatsoever amount until the appointed Administrative Police Judge renders her decision. Interest and penalties, even so, will continue to accrue during this portion of the appeal process. Oft taxpayers will elect to file an appeal to the Appeals Division fifty-fifty if the taxpayer does non believe that the Appeals Division will deviate from the agent'south findings because the process affords the taxpayer time to prepare for the finalization of the assessment and payment of the assessed amount.

The appeals procedure at the Appeals Division level is relatively straightforward; the case is assigned to an administrative law guess ("ALJ"), and the ALJ holds a scheduling conference during which the parties agree to deadlines and a date for oral argument, if oral argument is requested. If the taxpayer requests oral argument, arguments are usually conducted telephonically and are, relatively speaking, coincidental. The central purpose of the oral arguments is to afford the ALJ with the opportunity to ask the agent and the taxpayer specific questions she may have.

Afterwards the ALJ issues her opinion, the taxpayer has two options if it disagrees with the determination: (i) appeal to the Board of Revenue enhancement Appeals or (ii) pay the assessed corporeality and file suit in Superior Court.

Board of Tax Appeals.

The Board of Tax Appeals is a government agency that functions as a quasi-court of appeals for various tax issues. Like an appeal to the Department's Appeal Partitioning, the taxpayer has thirty days after the ALJ renders her conclusion to file an appeal with the Board of Tax Appeals.

Typically matters are heard before a three-judge panel, similar to problems before a Washington Court of Appeals. Yet, unlike the courtroom of appeals, the panel will hear live testimony and will allow the introduction of show. Accordingly, earlier the parties argue a affair before the Board, each party (i.e. the taxpayer and the Department) volition have the opportunity to conduct discovery.

Discovery affords the taxpayer the opportunity to enquire the amanuensis nigh the process she employed to make up one's mind the purported malversation and, if relevant, whether the agent's position has changed from the initial audit to the time of the deposition. Such questions can be disquisitional considering the Lath will requite deference to the Section's noesis and expertise.

Formal vs. Informal Hearings

At the Board of Revenue enhancement Appeals, the taxpayer has the pick to select a formal hearing or an informal hearing From a surface level and practical standpoint, the central divergence between a formal and informal hearing is the limitations on judicial review.

At both a formal and breezy hearing a political party may submit hearsay testimony if the information is relevant and the Board determines consideration of the hearsay evidence proper. However, a formal hearing specifically adopts Washington's Administrative Procedure Act. As a result, judicial review of a formal hearing is limited to the record fabricated of the proceeding.

In contrast, WAC § 456-10 et seq. serves as the procedural guideline for an informal hearing. If a taxpayer petitions the Superior Court to review the Board'due south decision, then Washington's Administrative Process Act, RCW § .four.05 et seq., governs the claiming. Thus, a judicial challenge to an informal hearing is non bound past the verbatim report and evidence presented before to the Board.

The choice between a formal or informal hearing has a significant impact on the record utilized by a trial court if the taxpayer seeks judicial review of the Board's decision. Whether adjudication of an assessment should occur through a formal or informal hearing is dependent on a number of legal and factual issues detail to each appeal. For purposes of this post, taxpayers should know that whether a formal or informal hearing is all-time for its particular issue is something that should be resolved well before the taxpayer files its find of appeal to the Lath.

Thurston Canton Superior Court

If the taxpayer does non entreatment to the Board of Tax Appeals, the taxpayer has the right to pay the assessed amount and so seek a refund through a RCW § 82.32.180 lawsuit. All cases seeking a refund pursuant to RCW § 82.32.180 are brought in Thurston County. Payment in full of the assessed amount is a prerequisite to a refund adjust. AOL, LLC v. Washington State Dep't of Revenue, 149 Wn. App. 533, 205 P.3d 159 (2009).

Additionally, the taxpayer may petition the Department for a refund prior to filing arrange. If the taxpayer makes such a demand, then the statute of limitations (i.e. the deadline for filing suit) is tolled for 30 days. RCW 82.32.180. For about taxpayers, the determination of whether to seek relief from the courts in lieu of the Board of Taxation Appeals centers on the taxpayer's power to pay the full assessed amount.

Were Adequate Records Maintained?

There is one significant event a taxpayer should annotation when it considers whether to go immediately to courtroom to seek a refund or whether to seek administrative remedies commencement: if the Section determines that the taxpayer failed to maintain adequate records as required by RCW § 82.32 et seq., so the taxpayer cannot seek a refund via the court system if that determination becomes final. Therefore, if there is a finding by the Department that the taxpayer failed to maintain adequate records or give access to those records, the taxpayer must pursue administrative remedies to challenge that finding.

A refund suit is not an stance so long as that determination stands. However, if the matter is presented to the Board of Tax Appeals, for case, the party will nonetheless have the opportunity to seek review by a court, albeit not pursuant to RCW § 82.32.180, with some limitations. If the administrative route is not taken, then the taxpayer will probable be precluded from whatever judicial remedy.

When to Seek the Communication of a Tax Professional.

Both lawyers and certified public accountants accept the right to represent taxpayers earlier the Appeals Sectionalization of the Section and before the Lath of Tax Appeals. In well-nigh instances, a company's CPA will help in the audit and probable will represent the taxpayer until the audit is finalized.

However, once an assessment is before the Appeals Division, the taxpayer should seriously consider seeking the communication and representation of a lawyer that has adept before the Department. The reason for this is relatively straightforward: the Department'southward ALJ's are attorneys, not CPA's. Thus, the ALJ views the issue from a legal standpoint, not simply as an auditor.

If the assessed corporeality is large, or if the Notice of Assessment has the potential to disrupt time to come business practices, the taxpayer should consider seeking the communication and representation of counsel. Once the Observe of Cess is accounted final, the road the taxpayer chooses to challenge the assessment can have significant implications.

If a litigation strategy is not developed at that point, the taxpayer tin can inadvertently limit its abilities to pursue a petition to Thurston Canton. Appropriately, it is oft recommended that once the Section finalizes the assessment, the taxpayer should seek advice from a revenue enhancement chaser.

This post is for advisory purposes but and should not be construed every bit rendering legal advice. If yous have any legal questions, please practise non hesitate to contact MDK Police to schedule an appointment with i of our attorneys. Please note that MDK Law does not offering complimentary consultations or legal advice except in extremely limited circumstances.

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Source: https://www.mdklaw.com/an-overview-of-a-taxpayers-challenge-to-a-notice-of-assessment-issued-by-washingtons-department-of-revenue/

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