Don’t Show Up To A Gun Fight With Just A Knife

Posted by Kelley Lear on Jul 5, 2011 | 0 comments

Don’t Show Up To A Gun Fight With Just A Knife

Another day at the Institute for Professionals in Taxation Conference (IPT 2011), in San Antonio, Texas. Following up on the key note speech making a step by step case for state budget deficit pending doom (catch my colleague Traci Wheeler’s blog sharing what we learned), I was able to sit in on quite an interesting and insightful session entitled “State Tax Audit & Appeals Strategies”. The session was presented by Christopher Grisson, a partner at Bradley Arant Boult & Cummings, LLP, and Ben Turner, Tax Director at Aaron’s and finalist for “one of the funniest accountants in Atlanta”. They were well informed and kept the presentation lively with personal stories and a host of amusing maxims we can all learn from. In fact, there was so much great content here; I think I am going to share it in two blog posts…so stay tuned for “part II”.

To keep us on our toes, Turner actually inserted his Audit Maxims into the presentation in a seemingly random order. At least, what us linear tax folks might deem as random. However, as you got into the presentation, it made perfect sense. So, I will share their thoughts with you, interesting order and all (you will note key points mixed in with maxims)!

  1. Audit Maxim #7 – Remember you are in control of the audit.
    • Yes, you can tell an auditor, “no”!
    • If something doesn’t make sense, is over burdensome or is not in line with what you would expect to provide given what they are actually looking for, say “NO”!
  2. How to avoid audit – you can’t, so get used to it! You can however, give yourself a better chance to reduce the amount or length of audits and perhaps even avoid some.
    • Don’t make mistakes, and if you made them on your last audit, make sure you correct those for the future.
    • Make sure you have the experienced tax department personnel respond and fill out any/all questions.
    • Avoid media coverage.
  3. Preparing for audits – be prepared at all times!
    • Know what the hot issues are in each state you are doing business in, for example 482 is a hot issue in Georgia.
    • Sometimes you actually need to drag things out, especially if you need to look at the entire fact set for that audit. This seems to be contrary to standard practices of getting things over with as quickly as possible. But sometimes you need to just take the time.
    • Document, document, document!!! The best time to document a subjective state of mind is when that state of mind exists.
  4. Audit Maxim #8 – Always be humble. If you can’t be humble, at least appear to be humble.
  5. Audit Maxim #1 – Credibility is your most important tool.
    • Have to wholeheartedly agree with the authors here. Credibility and solid preparation is the key to reducing audit time and increasing tax savings.
  6. Document Retention – have lawyers review documents (retained and drafts). Don’t forget about attorney / client privilege.
  7. If you get audited, you need a plan –
    • Factual due diligence on major transactions during audit period.
    • Know it all, the good, bad and the ugly!
    • Know what to focus on and make sure your attorneys are in the loop.
  8. Audit Maxim #12 – It’s up to you to make the audit pay for itself.
  9. Prepare for audit – as I shared in my title, don’t show up to a gun fight with a knife. Know what you are in for and prepare!
    • Review prior audit files
    • Make sure all files are in order
    • Review law applicable to your issues
    • Prepare audit plan
    • Gather info and educate employees

And, there is greater audit content to come…stay tuned for part II of this blog post, and share what you are doing out there to get through successful audit cycles. Are you coming out unscathed or bleeding uncontrollably?

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