Hosts & Guests
Tips to Prep for an Audit with Meredith Smith and Connie Zoerink
Meredith Smith [00:00:02] Welcome to SALTovation. This SALTovation show is a podcast series featuring the leading voices in SALT, where we talk about the issues and strategies to help you make sense of state and local tax. Hi everyone. Today, Connie and I are going to kind of talk about some tips or tricks to start out for maybe a sales tax or its state tax audit. You know, we've seen a lot of increase in audit activity happening, Connie being kind of our resident audit handler. And we had one client kind of, you know, as we were talking through some of the issues with him say, like, you know, what could we have done differently so that we are right now facing an over million dollar assessment? And so I think that kind of triggered things that Connie and I thought we could share. And so I think from the beginning, you know, auditors will send you just a list of everything under the Sun, right? And so it's like, don't give it to them, give them, you know, reach out to someone and just kind of go through like, OK, well, what do you actually need? What do you really need? Do you really need my state income tax returns for a sales tax audit for the state of California when I'm in Colorado? So, you know, that was kind of one thing that we had talked about and kind of you had made, you know, kind of the suggestion of making sure you had like a pre audit call, right?
Connie Zoerink [00:01:30] Well, it's helpful to have a periodic call just to kind of get the auditor familiar of who you are and what you do and where you're at kind of what you're doing because a lot of times when they're asking for that sort of information, it's just because they're trying to understand your business. And so even, you know, 20, 30 minutes talking with them about what you do and how you do it and where you are, maybe even the systems you use and what kind of information they can have will help limit their information requests, right?
Meredith Smith [00:02:00] Like kind of you have the pleasure of educating a Denver auditor, right with a Denver on what software as a service was now and who knew in 2021 that you were educating an auditor on Assad's company?
Connie Zoerink [00:02:13] Right, exactly.
Meredith Smith [00:02:15] And then something else to do is we find that, you know, we have clients who operate in more than one state and auditors will ask, you know, they're auditing jurisdiction. And so only give them the kind of financials that are applicable to that business. So what expenses are running through kind of your wine business as a whole and you don't keep separate like jail systems, but you know that like, OK, all of our marketing activity happens in Denver and not Boston. So let's not give them any marketing activity and you can kind of bifurcate that right? You know, kind of do you want to hear that one kind of example that we're just struggling with with the city and county of Denver?
Connie Zoerink [00:02:53] Yeah. You know, another audit, another fun audit that we're dealing with. The information that was given to the auditor included assets that were kind of shipped everywhere. They are all across the country. And so the Denver auditor is looking at these assets saying, well, it all shipped to, you know, Virginia or Texas or what have you. But why is that showing up in the Denver jail? Why is it showing up in these books? And so it's an argument better not had if you can avoid it. So just trying to limit the information that you give them to what's applicable to their jurisdiction can be really helpful if you're able to do it right.
Meredith Smith [00:03:30] Well, and also just from fundamentally right, we have a lot of auditors comment on like, hey, we were stuck in like a really deep dark hole in the basement of your office building. You know, try to make it as comfortable because, you know, it sets up the auditor kind of like, Oh, kind of this this perception of contention?
Connie Zoerink [00:03:50] Absolutely. Yeah. I mean, they're human, too. I've gotten to know being on the industry side for a while to getting to know auditors that they're human too. And they have families and they have interests and hobbies outside of auditing. And sometimes they are really pleasant people, but they can be less pleasant when they're stuck in the darkest, you know, corner of the basement. You know, file room with the invoices from 1972 or whatever. You know, I think keeping that in mind and helping them to be comfortable, they're going to spend some time there. Sure, it's not going to be a lot of fun. Probably not as much fun for them, either. So just trying to make it as comfortable a process as possible.
Meredith Smith [00:04:30] Right. So I think really, you know, as we wrap up, we appreciate you all kind of listening to maybe our a little bit of it of audit advice. But really, you know, one audit is very expensive in addition to the money that you might be assessed, but it's a really big time suck on, you know, people who's not whose primary jobs are not to run, you know, tax audits. So to the extent that. You can put in the work at the beginning, right, to hone in your information. You could really pay off dividends in the end, that short of that concept of like short term sacrifice for long term gain. Right?
Connie Zoerink [00:05:15] Absolutely. The work up front makes it grow so much smoother, right?
Meredith Smith [00:05:18] And of course, you know, cultivation is always here. Connie loves audits.
Connie Zoerink [00:05:23] We love audits.
Meredith Smith [00:05:25] So thanks for stopping by, and you can always follow us on SALTovation.com Thanks. This podcast is for educational purposes only and is not intended, nor should it be relied upon as legal, tax, accounting or investment advice. You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.
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What You Will Discover:
- [00:51] How helpful it is to have a pre-audit call
- [02:15] What documents to submit
- [03:30] Auditors are people too
- “I’ve gotten to know being on the industry side for a while too, getting to know auditors that they’re human too, and they have families, and they have interests and hobbies outside of auditing. And sometimes they’re really pleasant people, but they can be less pleasant when they’re stuck in the darkest corner of the basement of the file room with the invoices from 1972 or whatever. ” -Connie Zoerink [03:53]
- “You can put in the work at the beginning to hone in your information could really pay off dividends in the end. That concept of short-term sacrifice for long-term gain.” -Meredith Smith [05:00]