COST Sales Tax Conference

OrlandoFebruary 25, 2015

Deb ElmoJOHNSON & JOHNSON

Jim McGowanSTAPLES

Kevin S. BerryGE

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Best Practices Transaction Tax Audits

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OVERVIEW

Best Practices Audits

Preparing for an audit

Dealing with auditors and requests for information

Handling disputed issues / assessments

Effectively resolving protests

Communication

How to communicate the effectiveness of Audit Team to upper

management

How to get recognition for Audit Team’s efforts

Has your company ever refused to sign a waiver requested by a taxing

jurisdiction?

A. Yes

B. No

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Yes No

0%0%

5

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BEST PRACTICES

Preparing for an AuditVerify audit notification details (Taxpayer/Audit Period/etc.)

Be aware of your company’s statute waiver policy and Statute of

Limitation issues

Review list of documents auditor is requesting

Review returns

Review results of prior audits / Have prior issues been corrected?

Understand potential under and over payment issues

Evaluate whether audit can be resolved more efficient manner

Has your company been asked to do a computer assisted state transaction tax

audit?

A. Yes, we gave the state the file they requested.

B. Yes, however, our company was unable to comply.

C. No – never was asked to do a computer assisted audit.

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Yes, we ga

ve th

e state th

e ...

Yes, howeve

r, our c

omp...

No – never w

as ask

ed to ..

0% 0%0%

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7

BEST PRACTICES

Dealing with audit requests for information All requests for information need to be in writing

Establish timelines and expectations

Pay attention to waivers and the dates - Push back

Answer all requests truthfully – If you don’t know the answer find out

before answering “off the cuff”

Only answer “the question” asked and document what you give to

auditors - Don’t say too much

Be aware of systems abilities and computer assisted audit requests

Dealing with difficult information requests (Apportionment/etc.)

How does your company handle post-audit protests?

A. Handles internally.

B. Hires outside assistance.

C. Strives to resolve at the audit level and never appeals audit issues.

D. All of the above.

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Handles intern

ally.

Hires o

utside assi

stance

.

Strives t

o reso

lve at

the a...

All of t

he above.

0% 0%0%0%

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9

BEST PRACTICES

Handling disputed issues / assessmentsAlways work on issues at the audit level first (move up chain of

command – i.e. supervisor and up)

Confirm Statute of Limitations on issues. Closely read all notices

and know your deadlines

Use all available resources – inside and outside specialists.

Internally communicate issues and potential financial impact

(Tax+Penalty+Interest) as quickly as possible.

Make sure that business is properly reserved for potential impact of

issue

BEST PRACTICES

Effectively resolving protestsKnow your statutory deadline dates

Follow procedures strictly

Settlement is your friend – try and use it

Consider hiring local, outside firm

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BEST PRACTICES

Communicating Audit Results to ManagementCommunicate issues / exposure throughout the audit process

Surprises at end of audit = Bad Communication

Create audit closure report that includes audit error details

Communicate details to correct audience and ensure errors get fixed

Highlight potential audit issues avoided (scope reduction / negotiation / unbundling

/ proper application of law)

Tax savings / avoidance is best sales pitch for Audit Team

Communicate efficiency of audit efforts

Need to communicate both audit effectiveness and efficiency

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SUMMARY BEST PRACTICES

Proper Audit Preparation + Planning = Effective / Efficient Audit

Get involved and know your business

Resolve issues at lowest possible audit level

Know your audit remedies

Communicate potential audit issues and financial impact to

management as early as possible

Communicate results/details of audits and follow up to ensure that

errors / faulty processes are timely corrected