The Sales Tax Sisters Channel: Top 5 Audit Documentation Gotchas

Your audit results live and die based on the quality and completeness of your documentation.  Yes, those receipts are a BIG deal.  Here are a few things that cost people money.

UPDATE! The Comptroller's Office is still OPEN... and they are HELPING!  (The Comptroller is FULLY Operational...This data is HISTORICAL)

Here's some news you can use! 

The following information is broken down by taxpayer situation in Texas.  Refer to the state taxing authority in all governing states.  States have different policies.

UPDATE: Until further notice, if your audit package is dated March 26, 2020 or later, the Comptroller's office is tolling the period to request a hearing if you don't agree with your audit result.  They will send notification when they reestablish the 60-day deadline to request a hearing and once we receive this notice, we will again update this post.  Be sure you are subscribed to our blog so you receive notification when this change has been made.

The Comptroller's Office is OPEN... but they are trying to HELP!

Here's some news you can use! 

The following information is broken down by taxpayer situation in Texas.  Refer to the state taxing authority in all governing states.  States have different policies.

UPDATE:  Corporate tax returns were NOT due Monday!

  UPDATE:  The deadline is April 15, 2020.  Businesses may request a six-month extension by filing Form 7004 and submitting a deposit for taxes owed.  Work with your tax filer to determine your best options.

I know that you are wondering if you have the right blog.  You do!  Nothing has changed.  We do not help people with federal income tax or franchise tax matters.  Both filings do impact sales and use tax matters.  Here's how:

WARNING!  Your Sales Tax Accrual Account Is Key

Warning! It is critical that you pay attention to your sales tax accrual account.  One of the first things an auditor does when reviewing company records is reconcile your sales tax accrual account.  The auditor must make sure that all sales tax collected is remitted to the state tax authority.  

I Don't Know!.. Year-End and Adjusting Journal Entries and Sales Tax

 At the end of year, everyone closes the books.  Your accountant goes over the records, you explain unusual transactions, and you enter year-end and adjusting journal entries.  Everything is great and you're ready to go.  Right?!  Wrong!...very wrong!

You got an audit notice...No worries!...The Top Four Things to Do

Nothing can kill a sugar or caffeine buzz quicker than an audit notice, right?  Not so fast!  The worst thing you can do is panic or allow an audit notice to color your day.   You've got this!!...You do!  Take a deep breath and DO NOT PANIC!

Back-to-School Isn’t Just For Your Kids! Educate Yourself.

 

I can always tell when fall is around the corner. It isn’t because of the cool weather (which rarely appears when school is starting) or my internal Spidey sense, it’s all the Back-to School ads on TV. That, coupled with notices about tax-free weekends, always signals that school is starting soon.

April Fool’s – Don’t Let the Joke be on you!

 

In honor of April Fool’s Day, which is just around the corner, I thought it would be good to highlight the most foolish things that I have seen as a sales tax consultant: Lies.

Why Am I Getting Audited?

“Why me?!” is a typical response when people get the notice of audit.  Here are the top reasons you are getting audited.

What Can I Do to Secure the Best Audit Result?

Everyone who receives an audit notice wants to know what they can do to secure the best possible result. For most taxpayers the “best” result is a minimization of (1) the money owed to the taxing authority, (2) money paid to any consultant, and (3) time devoted to addressing the audit. So what can you do to get the “best” results? ACTIVELY PARTICIPATE IN THE AUDIT PROCESS!!!

How Do I Avoid Owing the Tax Authority Money When an Audit Occurs?

I love this question.  The answer is simple.  Learn the tax rules as they apply to your business.  And prioritize compliance with the rules BEFORE an audit is generated.

By the time an audit is generated, your records are either good or they’re not.  You have taxed the transactions in the audit period correctly, or you haven’t.  You have paid sales or use tax due on your purchases, or you haven’t.  You have receipts and other documentation needed to conduct the audit, or you don’t.

I Hired a State Tax Consultant…They Just Took My Money And Ran (away from me)!

It is so disheartening to have someone tell me they paid someone to “handle” a sales tax audit for them and they feel cheated because nothing happened.  They have a bill and no one will speak with them about it.  For everyone who is going through an audit, I have a few things that you should question when hiring an advocate. The next blog will address what YOU can do to secure your best audit result.

Why Do Companies Have a Second Set of Books, i.e. Financial Records?

I went to a conference and the speaker encouraged business owners to have a second set of books.  I heard the suggestion and thought, “what is this craziness?!” The rationale was as follows:

  • The first set of books would be given to your CPA, and serve as the basis for tax filings etc.  It would accurately reflect expenses, revenues, etc.
  • The second set of books would remove select items to show “how the firm was really doing.”  The second set of books would eliminate expenses, such as owner salaries, owner-related expenses, and revenue that was deemed extraordinary.  It was advised that the second set of books be kept under lock and key and never confused with the “real” set of books.

As people began to make plans to institute this plan, I was struck by the level of risk associated with this practice.  It is truly dangerous to have two sets of books.

Even Glinda Can't Make a Valid Audit Deficiency Disappear

I recently came across a recording of Wizard of Oz in my DVR and I immediately started drawing parallels between those characters and the state tax world. Some clients are like Dorothy, thrown into a strange world (state and local tax), but willing to follow the yellow brick road on what can be a harrowing journey. Others are like the Lion, praying for courage or like Oz, hiding behind a curtain and making up stories to keep everything running smoothly.

Tax Amnesty - A Pot of Gold at the End of the Rainbow

I have been quiet lately because I took a little time out to go on a working vacation. But I am back now, rejuvenated and ready to share the latest interesting tidbits about sales and use tax. 

The most important thing that everyone needs to know is that there is a tax amnesty program currently in effect with the Texas Comptroller of Public Accounts. That means from May 1 through June 29, 2018, the Comptroller is waiving penalties and interest for businesses who:

  • Did not file a required return or report originally due before January 1, 2018
  • Made an error on a previously filed report that resulted in an underpayment of taxes or additional tax due
  • Or that don’t have a permit or proper registration for collecting and remitting Texas tax.

Computer Conversions: Right after I purchase tech it is upgraded!

One of the most heartbreaking things I see too often is the ineffective technology upgrade.  How can an increase in functionality be ineffective? There’s one huge way...when you have someone who refuses to use the new technology.

We have all seen companies that pay a lot of money for computer upgrades.  Management spends a lot of time and money on the computers, software, training, and troubleshooting.  Everything seems to be going great until someone makes a simple request.

Don't Let Spring Fever Turn into an Inferno for Your Business

Spring is upon us. The birds are singing, bees are buzzing, and the pollen count is off the charts. Even if you are experiencing snow in April (which is so weird), spring fever is still contagious. But business owners and accounting departments should not get carried away clearing out old files and records, in case the state taxing authority decides to visit.

When Cleanliness is Not Next to Godliness: Keep Your Records!

For those business owners who have never been through a sales tax audit, the idea that the state can audit your records for several years can come as a shock.  The statute of limitations for a sales tax audit varies from jurisdiction to jurisdiction.  In Texas, the statute of limitations is four years.  That means that an audit generated in 2018 can cover periods in 2014.

“The content of this website is intended to convey general information only and does not represent accounting, tax or legal advice or opinion. Because tax laws, policies, and applications are dynamic and fact-specific, please consult with a state tax professional for a complete analysis of law as it may apply to your specific situation at a particular time. If you require an in-depth review of a specific fact situation, please contact our offices to establish a client relationship for opinion and advice.”