Post on 26-Dec-2015
Contacted for Audit:Contacted for Audit: What to Expect What to Expect
November 13, 2013November 13, 2013
Presented by Tennessee Department of Presented by Tennessee Department of RevenueRevenue
What is an Audit?What is an Audit?
Review or examination of a Review or examination of a
taxpayers books, records, accounts taxpayers books, records, accounts
and/or financial informationand/or financial information
Ensure information is reported Ensure information is reported
correctly and according to tax lawscorrectly and according to tax laws
Verify the tax reported is accurateVerify the tax reported is accurate
Audit SelectionAudit Selection
Computer screeningComputer screening
Document matchingDocument matching
Related examinationRelated examination
Knowledge basedKnowledge based
SEATA referralsSEATA referrals
Audit NotificationAudit Notification
First, by telephoneFirst, by telephone
Then, confirmation by mailThen, confirmation by mail
Telephone ContactTelephone Contact
Who prepares the returns? How long?Who prepares the returns? How long?
Who will auditor work with?Who will auditor work with?
What is your service or business type?What is your service or business type?
How many locations?How many locations?
Telephone ContactTelephone Contact
Does company own other Does company own other
businesses?businesses?
Are you on calendar or fiscal period?Are you on calendar or fiscal period?
Do you do business in other states?Do you do business in other states?
Do you have computerized records?Do you have computerized records?
Confirmation LetterConfirmation Letter
Confirm date and timeConfirm date and time
Taxes to be auditedTaxes to be audited
Records neededRecords needed
Taxpayer rightsTaxpayer rights
Records Requested Records Requested
Chart of accountsChart of accounts General ledgerGeneral ledger General journalGeneral journal Sales journalSales journal Purchase journalPurchase journal Sales invoicesSales invoices Purchase invoices Purchase invoices
Depreciation Depreciation schedulesschedules
Copies of Federal Copies of Federal Income Tax, F & E, Income Tax, F & E, Sales and Business Sales and Business Tax returnsTax returns
Resale/exemption Resale/exemption certificatescertificates
Bank statements Bank statements and cancelled and cancelled checkschecks
Annual stockholder Annual stockholder reports and audited reports and audited financial statements financial statements
Electronic RecordsElectronic Records
What is available electronicallyWhat is available electronically Determine sales to auditDetermine sales to audit Determine expense accounts to auditDetermine expense accounts to audit Review detail or sample invoices from Review detail or sample invoices from
selected sales or expense accountsselected sales or expense accounts Results are extrapolated to determine Results are extrapolated to determine
proposed assessment or refundproposed assessment or refund http://tn.gov/revenue/tntaxes/sales/http://tn.gov/revenue/tntaxes/sales/
statisticalsampling.pdfstatisticalsampling.pdf
TAXPAYER BILL OF RIGHTS
(1) Receive fair and courteous treatment from all TDR employees;
(2) Receive tax forms and information written in plain language;
(3) Receive prompt and accurate responses to all questions and requests for tax assistance;
TAXPAYER BILL OF RIGHTS
(4) Request public records;
(5) Be assured that the department will keep confidential the financial information you give it;
(6) Know the department’s policies with respect to use and retention of personally identifiable information;
TAXPAYER BILL OF RIGHTS
(7) Receive tax notices that provide an explanation of the amount being billed;
(8) Receive a clear set of rules and procedures to resolve tax problems that arise from the interpretation and administration of Tennessee’s tax laws;
TAXPAYER BILL OF RIGHTS
(9) Dispute any tax liability by filing a timely request for a hearing;
(10) Know that TDR employees are not paid or promoted as a result of money billed or collected from taxpayers;
(11) Suggest ideas about how the department can better serve you;
TAXPAYER BILL OF RIGHTS
(12) Prompt notification by the department of any refund to which you are entitled;
(13) Attend annual meetings held by the department in convenient locations to voice your suggestions;
(14) A ten-day notice before a levy on assets is enforced;
TAXPAYER BILL OF RIGHTS
(15) A thirty-day notice before seized assets are liquidated;
(16) A speedy, informal and inexpensive appeal of any tax dispute before an impartial hearing officer and to be represented by an attorney, CPA or other representative; and
(17) Any other rights the commissioner deems necessary and appropriate.
What taxes audited?What taxes audited?
Generally, all taxes that the Generally, all taxes that the
taxpayer files with the taxpayer files with the
Department of RevenueDepartment of Revenue
Tax Type ExamplesTax Type Examples
Sales & UseSales & Use Franchise & ExciseFranchise & Excise BusinessBusiness Wholesale Alcoholic Wholesale Alcoholic
BeverageBeverage Wholesale BeerWholesale Beer Bottlers Gross Bottlers Gross
ReceiptsReceipts Coal and Mineral Coal and Mineral
SeveranceSeverance Income & InheritanceIncome & Inheritance
Bail BondBail Bond Liquor by the Drink Liquor by the Drink Mixing BarMixing Bar RecordationRecordation Cigarette & TobaccoCigarette & Tobacco Vending MachinesVending Machines Coin AmusementCoin Amusement Utilities Gross Utilities Gross
ReceiptsReceipts Motor FuelMotor Fuel
First Day of AuditFirst Day of Audit
Discuss businessDiscuss business Discuss records Discuss records Discuss how records trace to journals Discuss how records trace to journals
and returnsand returns Power of attorney for non-employeesPower of attorney for non-employees How long will it take?How long will it take?
ConfidentialityConfidentiality
Tax returns and taxpayer Tax returns and taxpayer information is strictly confidential information is strictly confidential by statute. by statute. TCA 67-1-1701 TCA 67-1-1701
Power of Attorney required for Power of Attorney required for each CPA or attorney each CPA or attorney
Secure EmailSecure Email
Written request from taxpayer or Written request from taxpayer or representative to communicate representative to communicate via emailvia email
Internet portal – secure emailInternet portal – secure email
Tour of FacilitiesTour of Facilities
Helps auditor understand the Helps auditor understand the many aspects and many aspects and terminology of the businessterminology of the business
Audit Procedure Agreement Audit Procedure Agreement
Agreement of audit procedure to be Agreement of audit procedure to be using if 100% of records are not using if 100% of records are not audited.audited.
Statistical SampleStatistical Sample Test PeriodTest Period Purchase MarkupPurchase Markup OtherOther
Common MistakesCommon Mistakes
Not taking exemptionsNot taking exemptions ContractorsContractors Not reporting all assetsNot reporting all assets Not properly reporting salesNot properly reporting sales Wrong business tax classWrong business tax class Not including all items in taxable amountNot including all items in taxable amount Not remitting tax collectedNot remitting tax collected Internet purchasesInternet purchases
Finalizing the AuditFinalizing the Audit
Delivery and explanation of work Delivery and explanation of work paperspapers
Explanation of penaltyExplanation of penalty Explanation of optionsExplanation of options Explanation of payment or refund Explanation of payment or refund
processprocess Tax Enforcement (423) 634-6288Tax Enforcement (423) 634-6288 Additional questionsAdditional questions
Taxpayer AppealsTaxpayer Appeals
A conference with the Audit A conference with the Audit Supervisor and/or Tax ManagerSupervisor and/or Tax Manager
An informal conference with a An informal conference with a TDR administrative hearing TDR administrative hearing officerofficer
Filing suitFiling suit
Be PreparedBe Prepared
Keep detailed recordsKeep detailed records Keep records organizedKeep records organized Get completed exemption Get completed exemption
certificates at point of salecertificates at point of sale Ask questionsAsk questions
InformationInformation
Web site is: Web site is: http://tn.gov/revenue/
Toll free telephone: 800-342-1003Toll free telephone: 800-342-1003
Local number : 423-634-6266Local number : 423-634-6266
Tax help email: Tax help email: TN.Revenue@tn.gov