Why is an Audit of your Form 571-L Business Property Statement a good thing?

Understanding the Advantages of Form 571-L Business Property Statement Audit

When you hear the term 'audit' from a government agency, it's common for fear to set in. However, an audit of your Form 571-L, or Business Property Statement, could potentially be a reason for relief rather than fear.

The Form 571-L Business Property Statement: What Is It?

Every fiscal year, each California-based company is mandated to file a Form 571-L Business Property Statement. This form, submitted to the local county assessor, details all non-real estate related properties and equipment, such as machinery and computers. The county then imposes a tax on this equipment, equivalent to roughly 1.11% of its depreciated value.

The Challenges of Business Property Taxes

Seemingly straightforward, business property taxes are more complex than they appear. They're often overlooked and little understood, becoming the "runt of the litter". Moreover, most CPAs, being engrossed in IRS issues, and internal staff, burdened with day-to-day job requirements, may lack the time to fully comprehend the rules and regulations. These regulations, used by assessors to determine depreciated values, are antiquated and often misapplied. As a result, approximately half of California's companies are overtaxed by their assessor's office.

Audit Cycle of the Form 571-L Business Property Statement

Despite the complexity, companies that meet specific thresholds are likely to be audited once every four years, with the audit encompassing the previous four years of 571-L filings.

Why Is An Audit Beneficial?

Well, during this audit process the years under audit are “re-opened” in other words, Paramount Property Tax Appeal can go back and find all of the misclassifications, longer than needed useful lives, ghost assets and other assorted mistakes and we can reduce down the assessed value for the years under audit. This allows our clients to obtain refunds for Business Taxes they have paid in the past four years. That's FOUR YEARS of refunds.

Paramount Property Tax Appeal has found typical savings for our clients is around 25%.

The Financial Impact of a Form 571-L Audit

If a company has $5,000,000 in Business Personal Property it means they would have to pay approximately $55,000 per year in taxes on this property. Over the last four years that would add up to $220,000. By reducing this amount by 25% we would help our clients put approximately $55,000 back in their bank accounts. This savings typically comes to the client in the form of a refund of overpaid taxes from the county.

When I was a Controller, if someone would have told me I could go through an audit and get in excess of $50,000 back as a result, I’d ask “Where do I sign up”? I’d take great joy in walking that $50,000 check into my CFO’s office.

Learn More About Form 571-L Audit Benefits

Interested in discovering more about why an audit of your Form 571-L Business Property Statement can be beneficial for you? We're always here to help.

Remember to utilize the following keywords when searching for related information: '571-L', 'Form 571-L', 'Business Property Statement Form 571-L', 'What is 571-L', 'What is the purpose of Form 571-L'.

Rob Burden
Vice President of Sales
R.Burden@pptaxappeal.com

Frequently Asked Questions

1. What properties are included in the Form 571-L Business Property Statement?

The Form 571-L Business Property Statement includes all non-real estate related properties and equipment. This can range from machinery and computers to office furniture and fixtures.

2. How is the depreciated value of the business property determined?

The depreciated value is determined by assessors using certain rules and regulations, which can sometimes be archaic and often misapplied. This highlights the importance of having an expert review your Form 571-L to ensure accurate valuation.

3. What are "ghost assets"?

Ghost assets refer to listed assets that are no longer in possession or use by the company, yet they remain in the books. These could be due to assets being lost, stolen, or discarded without proper documentation.

4. What happens if my business is found to have overpaid its taxes?

If an audit reveals that your business has overpaid its taxes, the excess amount can be refunded. This refund is usually in the form of a cheque from the county.

5. How often can we expect an audit of Form 571-L?

Typically, companies that meet certain thresholds can expect to be audited once every four years, covering the previous four years of 571-L filings.

6. What can Paramount Property Tax Appeal do to help with my Form 571-L audit?

Paramount Property Tax Appeal can review the years under audit, identifying and correcting any misclassifications, redundant or ghost assets, and other mistakes. This could potentially decrease the assessed value of your business property, leading to substantial refunds on overpaid taxes.

7. How can I learn more about Form 571-L and its audit?

Feel free to reach out to Paramount Property Tax Appeal. Our experts are always available to provide more information and guide you through the intricacies of Form 571-L and its audit process.