Purpose and Goals of the Alabama Personal Property Audit Program
- The goal of Alabama’s Personal Property Audit Program is to achieve equalization of business personal property valuations and assessments statewide.
- The auditing program facilitates the full and proper listing of all business personal property in the assessment jurisdiction. All business personal property accounts are subject to audit; however, emphasis is placed on auditing new accounts, accounts with significant changes from the previous year, and accounts that are subject to being improperly reported.
Overview of Types of Audits
Audits are performed on both in-state and out-of-state businesses that have taxable business personal property in Alabama. Those businesses which have demonstrated a past history of either partial or non-compliance of reporting procedures, as well as businesses selected by random sampling shall be audited. There are four types of audits: review audits, phone audits, physical inspection audits, and detailed audits.
- Review Audit
- This is the simplest form of audit. A review audit is performed on every business personal property return filed each year.
- Telephone Audit
- This form of audit is used to clarify reported information or to obtain additional information.
- Physical Inspection Audit
- This type of audit requires a visit to the business location. It involves gathering the necessary information to compile a listing of the personal property located at the business site. The term physical inspection and on-site audit are both used to indicate an inspection of the location.
- The State Department of Revenue-Ad Valorem Tax Division requires twenty (20%) percent of all active business personal property accounts be reviewed using this method of audit annually. As a result of these inspections and audits, all accounts will have been physically inspected every five years. The maintenance of personal property accounts is an ongoing process that is reported no less than every five years, as this is the statutory period for escaped taxes.
- Detailed Audits
- This type of audit may be conducted as on “on-site” audit or as a “desk” audit. The “on-site” detailed audit is the most time-consuming, as well as the most accurate form of audit. If satisfactory information cannot be gathered by phone or by visiting the business, the business has been randomly selected for a detailed desk audit, or the auditor feels that a detailed examination of the business records and accounting procedures is necessary, then a detailed audit is performed.