You received an Audit Notice, now what? Audits can be stressful. To help reduce that stress, The Brennan Group offers the following advice and tips.
Play nice in the sandbox!
- If you receive an Audit Notice with a review date that’s not convenient for you, contact the Auditor and work with them to set a date that fits your schedule. Audit start dates are flexible and auditors don’t mind working with your schedule.
- When first meeting the auditor, either on the phone, via e-mail, or at your door …. be professional, respectful, polite, courteous, and nice. Treat them as if they are a guest in your home. The first impression with the auditor will set the “tone” throughout the entire audit. Being stand-offish or assuming it will be an adversarial relationship is only going to hurt you in the end.
- It’s in your best interest to establish some sort of “personal connection” with the auditor if the opportunity arises (i.e. you both grew up in Dallas, etc.). You’re not going to be BFFs, but friendliness goes a long way.
- Give the auditor a decent place to work – but don’t make them too comfortable!
You don’t have to be a Boy Scout to be prepared!
- Be prepared for an audit by knowing what your potential liabilities and overpayments are. If you are on a regular audit cycle or have received an audit notice, have The Brennan Group come in first to identify any exposures and overpayments.
- Make sure you have the records requested by the auditor ready for review. This will show them that you are organized and on top of things. It impresses upon the auditor that you are knowledgeable and have an interest in the audit and want to be cooperative.
- Meet with the auditor the first day and have them explain what their exact plan is and what they are looking for in every aspect of their audit.
- Ask the auditor how long they have been an auditor and what experience they have in auditing companies in your specific industry. It’s important to know their level of knowledge of the laws that pertain to your company’s operations.
- On that note – don’t believe everything the auditor tells you about what is taxable and what is exempt. Very often, further research gives a different answer!
- Don’t be afraid to ask to speak with the auditor’s supervisor if it is warranted.
- Only provide the auditor with the specific records they request. Do not provide or offer any records that they have not requested. Similarly – only answer the auditor’s specific questions. Do not offer any information that they have not specifically inquired about.
- Your company should have only one point person with whom the auditor communicates. Make sure your staff knows not to answer questions regarding any business matters that are not specifically associated with their job responsibilities.
Choose the best kids to be on your team!
- Sales/use tax laws can be very complicated, so make sure you are represented by an accountant who specializes in sales/use tax law. Accountants and CPAs who prepare income tax returns and keep books for companies do not specialize in sales/use tax law. Although they may be able to assist you with a sales/use tax audit, an accountant who strictly specializes in sales/use tax law has in-depth knowledge of the laws and can provide expert audit defense. Think about it this way …. a company wouldn’t hire a general business law attorney to handle a criminal tax fraud case. Similarly, a company shouldn’t hire a general business tax accountant to handle a sales/use tax audit.
- The auditor is there to determine if you have underpaid your sales/use taxes. They are not auditing your records to look for overpayments and refund you any money. So, in conjunction with the audit, why not have an experienced sales/use tax accountant review your purchases to determine if you have overpaid any sales/use taxes? Usually, the overpayments can be used to offset any potential tax liability discovered by an auditor. And, The Brennan Group knows from many years of experience that 99% of companies have overpaid their sales/use taxes.
- Don’t just pay the final audit liability! Make sure an accountant who specializes in sales/use tax law reviews the findings. For many of our clients, The Brennan Group has reduced audit findings by double-checking the auditor’s work and applying overpayments. We can perform Audit Defense Reviews on a contingency fee basis, which means we review your audit for free, and if we find any overpayments to lower your audit liability, you only pay us a percentage of those savings.
So don’t panic when you receive an Audit Notice! Follow these tips and you’ll be the winner.