Colorado Tax Audits

Colorado is a “piggy-back” state for income tax purposes, meaning that Colorado tax is determined by a taxpayer’s federal taxable income. Consequently, Colorado Department of Revenue (CDOR) income tax return audits of individuals are pretty rare. Much more frequently, CDOR will assert that a non-resident is really a resident for tax purposes, though, which forces the taxpayer to prove the negative: “No, I was neither a resident, nor was I domiciled, in Colorado that year.”

In this situation, the taxpayer will have to gather as much documentation as possible to show that he or she had minimal, if any, ties to Colorado, and therefore is not subject to Colorado income tax. The taxpayer will have to prove that he or she was not “domiciled” in Colorado for the year under audit. It is a very fact-intensive analysis, and frequently leads to litigation in Colorado District Court.

Detailed examinations or audits can take weeks or months to complete, and front-line Revenue Agents are not inclined to accept excuses or the lack of substantiation. They are inclined and instructed to go by the book.

Regardless, David A. Sprecace, P.C. can provide peace of mind that you will not have to endure an examination alone, but with a tax attorney of more than 23 years’ experience. Call 303-454-8260 or email Dave at Dave@MyTaxLex.com to set up a phone consultation.