Audit System Manual graphic

[ Audit System Manual- TOC ] [ Ch 1 - Introduction ] [ Ch 2 - Preparing for an Audit ] [ Ch 3 - Conducting the Audit ] [ Ch 4 - Completing the Audit Forms and Schedules ] [ Ch 5 - Audit System Screens ] [ Ch 6 - Miscellaneous ] [ Ch 7 - USDOL - Tax Performance System ] [ Ch 8 - Computer Fundamentals & Hardware ] [ Appendix ]
[ 1.1 - Objectives of a Field Audit Prg ] [ 1.2 - Definition of a Field Audit ] [ 1.3 - Purpose of an Audit ] [ 1.4 - Authority to Review Records ] [ 1.5 - Classification of Audits ] [ 1.6 - Audit Scope ] [ 1.7 - Required Audit Scope ] [ 1.8 - Tolerance/Expanding the Audit ] [ 1.9 - Audit Quota ] [ 1.10 - Audit Selection ] [ 1.11 - Audit Assignment Control ][1.12 - Components of a Completed Audit] [1.13 - Review Process for Audits] [ 1.14 - Audit Retention ]

Chapter 1:     Introduction

comments to: Tax Department

1.5    Classification of Audits

Each audit will receive one or more of the following classifications:
  1. Change or No Change audit. A Change audit is a systematic examination of an employer's books and records that results in the discovery that total wages, taxable wages or taxes were not correctly reported by the employer. A No Change audit is also a systematic examination of an employer's books and records that finds the employer correctly reported total wages, taxable wages, and taxes.
  1. An Audit qualifies as a Change audit if:
  1. Total wages, taxable wages, or taxes owed change as the result of adjustments (C-5's) filed at the conclusion of the audit.

  2. Total wages, taxable wages, or taxes owed change because a different liability date is found, an amended C-1 is prepared, and additional tax reports are submitted as a result of the audit.

  3. A change in ownership causes a change in total wages, taxable wages, or taxes owed. For example, the predecessor previously reported wages and taxes that the successor should have reported. An audit on the predecessor qualifies as a Change audit because total wages, taxable wages, and taxes for the predecessor were not correctly reported. If the successor employer is also being audited, that audit would also qualify as a Change audit.

  4. The assignment to collect delinquent reports is converted into an audit. Total wages, taxable wages, and taxes owed would change when the delinquent reports are submitted as a result of the audit.
  1. An audit does not qualify as a Change audit if:
  1. Social security numbers are added or corrected for employees.

  2. The spelling of names is corrected.

  3. An audit is conducted while establishing a new employer. For the audit to count it must meet DOL audit scope requirements. Reference Chapter 1 - "Audit Scope".
  1. Large Employer Audit. An audit performed on an employer who paid wages to 100 or more individuals during the calendar year or years being audited.

    Example: An Accounts Examiner audits a business for calendar year 2001 in calendar year 2002. The business employed 100 different individuals during audited calendar year 2001 and would qualify as a "large employer" even though the average employment never exceeded twenty-five (25).

  2. Small Employer Audit. An audit performed on an employer who paid wages to fewer than 100 different individuals during the calendar year or years being audited.

    Note: The Tax Audit Program will automatically classify the audit as large or small based on the number on employees listed on schedule 1.
first previous next last Tax Menu

Texas Workforce Commission  |  Unemployment Tax

Last Revision: May 05, 2011