CPA Practice Advisor

SEP 2014

Today's Technology for Tomorrow's Firm.

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September 2014 • www.CPAPracticeAdvisor.com 25 NOT E: In a d dit i on t o th e t i ps below, businesses should pay special atention to where they have nexus, or the obligation to collect and remit sales tax. If a business has nexus in a state, and does not collect tax there, auditors fom that state can levy penalties and interests against that business for the delinquent taxes. ORGANIZE YOUR RECORDS: A business may have remited more or less than was required to its state DOR agency. Te auditor will eval- uate the validity and accuracy of the ta x and the amount remited. Te auditor will have the right to require t h e b u s i n e s s t o s h o w s a l e s t a x returns, excise ta x returns, docu- mentation for use tax, retail sales tax, business and occupational tax and a l l cr it ica l records related to t he business. Individual sales transac- tions will also be evaluated, so it is imperative that the business keep efcient documentation to support individual transactions and be able to make these records accessible to the auditor. For businesses that don't currently have an eff icient way to store and retrieve records, consider a sales tax sofware solution that will automate the process. DON'T RUSH THE AUDIT PRO- CESS: Sales tax audits can be tedious and time-consuming. Te auditor will conduct a thorough audit and detailed examination of the busi- ne s s's s a le s re c ord s . B e s u re a l l t r a n s a c t i o n s a r e d o c u m e n t e d properly in order to avoid wasting your time and that of the auditor. If applicable, don't forget to have cash register tapes ready and/or exemp- tion certifcates for the audit. DOR authorities have become aware of t he u nt a p p e d s a le s t a x r e v e nu e available, so they are closely scruti- nizing businesses that have not been managing their customers' and/or vendors' sales tax exemption certif- cates. ADVISE YOUR CLIENT TO ALLOW YOU TO REPRESENT HIM OR HER IN THE AUDIT: It is hard to imagine a more ted iou s , cost ly a nd non- productive process than the sales and use tax audit. K nowing how to s pe a k t he s a me l a ng u a ge a s t he auditor and respond appropriately to questions and requests for records w ill make the process go so much more smoothly. Be sure you recom- mend t hat your cl ients seek your advice and services in the event of a sales tax audit. Ultimately you will s a v e t h e m t i m e a n d m o n e y b y helpi ng you r c l ient or ga n i z e a l l necessar y documents to facilitate the sales tax audit and having it done quickly and efciently. You will also be able to provide guidance about any pending problems concerning the audit. Alison Paisley is Senior Manager of ACP Marketing at Avalara, Inc. ( www.Avalara. com ) A Year in the Life of a SALT Accountant is sponsored by Avalara How to Prepare for a Sales Tax Audit By Alison Paisley T he sales and use tax audit could pos- sibly be one of the biggest challenges that your business clients will face. If you are working with a client who has been selected for an audit, you are now tasked with proving that the client remited the correct amount of sales tax to the state Depart- ment of Revenue (DOR) agency. You will gain confdence about the pending sales tax audit if all documents have been prepared properly. Te fol- lowing tips will help you better prepare for the dreaded sales tax audit. September SALT Checklist ✓ Analyze your clients for tax audit red fags (see related article) ✓ Examine client internal controls relating to state and local tax issues and for future protection from audits ✓ Filings – in addition to current tax obligations, help clients get up-to-date on delinquent tax flings ✓ Reporting - review clients' year-to-date SALT ex- pense and liabilities for accuracy ✓ Planning – estimate and schedule all state and local tax flings that will be due in Q4 ✓ Legislation – recent legislation has affected taxes in Illinois, Utah, and California. Make sure you're up-to- date on SALT-related legislation in all states where you have clients

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