Written by: Kristen Schroeder—Director, State Income Practice Lead


In the intricate landscape of corporate taxation, an IRS audit is a daunting experience. The repercussions of such an audit can extend beyond federal taxes, often requiring companies to revisit and amend their state income filings. The key document in this process is the Revenue Agent Report (RAR), providing insights into adjustments made by the IRS.

Successfully navigating filing amended returns requires a comprehensive understanding of state tax laws and a strategic approach to compliance. This article explores the essential steps and best practices for amending state income filings post-IRS audit and highlights the advantages of outsourcing these complex tasks to specialized tax consulting firms like DMA.

Understanding the RAR and Its Implications

The Revenue Agent Report (RAR) serves as a roadmap for companies looking to address discrepancies identified during an IRS audit. While the audit primarily focuses on federal tax matters, the adjustments made can have a cascading effect on state income filings. It is crucial for companies to carefully scrutinize the RAR to determine the specific changes affecting state tax liabilities.

Steps for Amending State Income Filings

Conduct a Comprehensive Review
  • Thoroughly analyze the RAR to identify adjustments affecting state tax obligations
  • Understand the statute of limitations implications in each state where the company operates
Update State Income Tax Returns
  • Amend state income tax returns based on the adjustments outlined in the RAR
  • Ensure accurate reporting of income, deductions, and credits in accordance with each state’s requirements
Quantify the Impact
  • Quantify the financial impact of the RAR adjustments on state tax liabilities
  • Assess any interest or penalties that may accrue due to the changes
Prepare Necessary Documentation
  • Compile and organize all documentation supporting the amended filings
  • Maintain clear records of the RAR, original tax returns, and any additional documentation provided during the audit

Best Practices for Amending State Income Filings

Timely Compliance

Initiate the Amendment Process Promptly
Time is of the essence when addressing adjustments identified in the Revenue Agent Report (RAR). Delays can lead to penalties and interest, making it crucial to initiate the amendment process promptly.

Meet State-Specific Deadlines
Each state has its own deadlines for filing amended returns. Complying with these deadlines is essential to avoid additional financial implications. A proactive approach ensures the company remains in good standing with state tax authorities.

Engage State Tax Experts

Leverage the Expertise of Professionals
State tax laws are complex and vary widely among jurisdictions. Engaging professionals with specialized knowledge of state tax regulations ensures that amendments accurately reflect each state’s requirements.

Ensure Compliance with Unique Requirements
State tax codes can have unique provisions that differ from federal regulations. State tax experts understand these nuances and can tailor amendments to meet the specific compliance standards of each jurisdiction.

Outsource to Specialized Firms

Leverage Expertise and Experience
Specialized tax consulting firms such as DMA bring a wealth of expertise and experience to the table. Their in-depth understanding of state tax laws, regulations, and procedural intricacies positions them to handle the complexities of amending state income filings with precision.

Optimize Resources
Outsourcing to a dedicated firm allows companies to optimize their internal resources. Instead of diverting valuable resources towards the amendment process, internal teams can concentrate on core business activities, improving overall operational efficiency.

Ensure Compliance
Tax consulting firms specialize in ensuring compliance with state regulations. By outsourcing, companies benefit from a thorough review process, minimizing the risk of errors that could lead to penalties or regulatory issues.

Rely on Efficiency and Timeliness
Outsourcing expedites the amendment process. Specialized firms are equipped to handle the intricacies efficiently, ensuring that amended filings are submitted accurately and within the required timeframes. This efficiency is particularly valuable when dealing with resource constraints or tight deadlines.

Add Value
Look for items outside of the IRS adjustments to take advantage of state tax recovery and minimization opportunities. Several states allow adjustments outside of the IRS audit to be included, resulting in less tax and interest paid and/or refunds. Additionally, states typically allow the offset of tax up to the amount owed, regardless of the normal three- or four-year statute of limitations.

Adhering to these best practices—prompt initiation of the amendment process, leveraging state tax experts, utilizing technology for efficiency, and outsourcing to specialized firms—positions companies to navigate the post-IRS audit landscape with confidence, ensuring both compliance and accuracy in state income filings.

Amending state income tax filings post-IRS audit demands a strategic and meticulous approach. When partnering with DMA as your specialized tax consulting firm, you leverage external expertise, ensuring compliance, accuracy, and timely submissions; and safeguard your financial interests and reputation in an ever-evolving tax landscape.


This website content should be used for general informational purposes only, and not as a substitute for consultation with professional tax, legal, or other competent advisors. Before making any decision or taking any action based upon information contained on this website, you should consult with a DMA professional.

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