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The SCDOR is committed to maximizing compliance through the fair administration of state tax laws. As part of that process, we routinely audit tax returns and business records to ensure that taxpayers are complying with the law.

The SCDOR regularly analyzes information from past filed returns, along with information we receive from the IRS, other state agencies, and various other sources. Audits are often the result of discrepancies we find in this information.

What is an audit?

An audit is a thorough examination of tax accounts, returns, and business records with the goal of determining whether a taxpayer complies with South Carolina tax law.

Depending on your specific circumstances, the notices you receive from the SCDOR may use the term “examination” instead of “audit.”

How do I know I am being audited?

The SCDOR will send you a notice before we begin our audit. Depending on the type of audit, the letter may be titled:

  • Audit Appointment Letter (AS-5)
  • Audit Request (I-366)
  • Individual Income Tax Office Audit Proposed Assessment (I-369)
  • Notice of Proposed Adjustment (I-266)
  • Proposed Assessment for Failure to File (I-331) 

In addition to alerting you of the audit, the notice may also include a list of documents you must send the SCDOR and your auditor’s contact information.

Do not ignore any notice you receive from the SCDOR! Ignoring an audit notice or not sending the requested documentation will not cause the audit to go away.

Field Audits can be conducted electronically or in person. Field Audits always start with the SCDOR sending you an Audit Appointment Letter (AS-5).

General process for Field Audits

  • Step 1 – The taxpayer receives an initial contact letter from the auditor.
    • The auditor’s letter includes a list of audit items requested.
    • The taxpayer provides that documentation before meeting.
      • Typically, the taxpayer uses GoAnywhere (a secure file-sharing service) or MyDORWAY’s document upload tool.
      • The taxpayer should also provide a completed Power of Attorney form and Statute of Limitations Waiver, if applicable.
  • Step 2 – The SCDOR and taxpayer schedule a field visit, SCDOR office visit, or electronic audit.
    • A field visit is typically at the taxpayer’s corporate headquarters or place of business.
    • As part of the visit, the SCDOR interviews the taxpayer to clarify items or processes and may request additional documentation.
  • Step 3 – The SCDOR sends follow-up questions to the taxpayer as the audit progresses.
    • These questions are meant to clarify items or processes as part of the audit review.
  • Step 4 – The SCDOR and taxpayer have additional conferences as needed.
    • These conferences are scheduled as needed by either the SCDOR or the taxpayer.
  • Step 5 – The SCDOR provides a Draft of Audit Findings to the taxpayer.
    • This is a preliminary review of the SCDOR’s findings through the audit.
    • The taxpayer has an opportunity to respond, and the SCDOR will make any necessary adjustments before issuing a Final Audit Packet.
  • Step 6 – The SCDOR issues a Final Audit Packet to the taxpayer.
    • The SCDOR will issue a final packet of information at the end of the audit. This may include a Proposed Notice of Assessment, Proposed Refund, Return(s) Accepted as Filed, Waiver of Restrictions (SC-870), the Taxpayer Bill of Rights, and other information related to the audit.
    • These are the final results of the SCDOR’s audit and will include the balance the taxpayer owes the SCDOR or the refund the SCDOR owes the taxpayer, or it will reflect no change in the balance.

After you receive your final audit packet

If you agree with the results of the audit, you have two options:

  • Pay the audit assessment in full.
    • Scan the QR code on your Proposed Notice of Assessment or visit dor.sc.gov/pay.
  • If you agree with the results but cannot make full payment, sign the SC-870 and return it to your auditor or their supervisor.
    • Note that by signing the SC-870, you agree to pay the tax, interest, and penalties due. You will also waive the right to appeal this matter further. The SCDOR will issue you a Final Assessment notice after processing your SC-870.

If you wish to appeal the results of your audit, learn more about the SCDOR’s appeals process. You have 90 days to appeal the assessment.

If you don’t appeal the results, but do not pay what you owe in full, the SCDOR will issue you a Final Assessment, and your balance will enter the SCDOR’s collections process.

If your audit resulted in adjustments to your federal taxable income, you need to amend your federal Income Tax return. The SCDOR will submit our adjustments to the IRS for review.

Desk Audits are usually conducted through mail. 

Desk Audits begin with the SCDOR sending you a letter, commonly an Audit Request (I-366).

The request letter will:

  • Ask for additional information or verification of items on your return.
  • Provide instructions for how to submit this information, including a due date. 

After the SCDOR completes our examination, we will send you a letter, commonly a Notice of Proposed Adjustment (I-266), detailing the adjustments that we made to your return and any balance you owe. 

  • If you don’t respond to the SCDOR’s initial letter requesting information, we will make adjustments to your return and send an adjustment letter.
  • If the Desk Audit is the result of information the SCDOR received from the IRS or another governmental agency that led to adjustments to your return, the adjustment letter may be the first notice you receive from the SCDOR.
  • If the SCDOR determines that you had a filing requirement with South Carolina, but we have no records of you filing a return for the tax year, we will send a Proposed Assessment for Failure to File (I-331).

The letter will include instructions on how to pay the balance in full, request a payment plan, or appeal the SCDOR’s adjustments.