by Fresh Start Tax | Sep 21, 2017 | Tax Help
Florida – Sales and Use Tax Audit Defense – With Former Agents Since 1982 + Affordable 1-866-1040
Affordable Sales Tax Experts, Experienced Help, Free Consult
Use former Agents to defend your Sales Tax Audits, since 1982. We know the system.
Being former Florida sales and use tax auditors there are many misconceptions that the public has about sales and use tax audits.
You should know that the auditor does not know the extent of your liability if any until the Florida state auditor examines your records.
The auditor simply will only know information about your company from State of Florida internal records.
Florida – Sales and Use Tax Audit – Insider Tips from Former Agents
The books and records that you provide the auditor will be the basis for any audit findings.
We can help with your defense in an audit by controlling the records that are released to the auditor.
If the Florida Department of revenue contacted your company about a pending Florida sales use tax audit or you have already received the Florida form DR 840 – Notice of Intent to Audit Books and Records.
We can be your defense to a large assessment for sales tax, interest and penalty.
ou can call us today to review your tax audit papers so we can let you know the scope of the audit and a way to conduct the audit that is most beneficial to your business.
Processes + The Audit Process used by Florida Sales and Use Tax
The auditor will conduct a preliminary preparation for the audit prior to the actual start of the audit.
The auditor will obtain information from:
• examination of sales tax records on file with the Department of revenue
• business structure and activities from websites
• profile the Florida Secretary of State corporate website
• review of prior audits and results
• review of possible issues from the Florida tax law library
• standard industrial guides
• research information available on the Internet
• review any information in the audit found which includes the reasons the audit was selected.
The auditor will also conduct an analysis your company which will include:
• taxable sales compared to exempt sales
• taxable sales percentage
• amount of assets owned by a business
• results of prior audits
• Florida sales per federal tax returns versus Florida sales tax returns
• method of business operation
• business industry
• credits and exemptions taken
• change in volume of Florida activity
• tax rates
• use tax accrued on past sales tax returns
As a Former Florida Sales and Use Tax Auditor
As a former sales tax auditor this research and analysis provided the basis to prepare an industry-specific audit plan and pre-audit interview questions.
The “audit plan” or should I say the auditor’s plan of attack will be the auditor’s guide for picking low hanging fruit.
Depending on the industry the Florida Department of revenue has a specific audit plan for auditors to follow in order to capture any sales tax not paid or remitted.
In order to limit the tax exposure, our former auditor will conduct the entrance interview with the Florida state tax auditor.
The auditor will conduct the audit entrance interview with the sole purpose of learning about the business’s operation and establish a rapport with the contact person of the business.
In order to learn more about the business operations during this interview, the auditor may want to ask some typical questions such as:
• what is the main business activity.
• where are your customers located – any out-of-state customers, if so how do you account for the sales
• are there any other sources of income
• who completes the sales and use tax returns
• what control documents are available, such as chart of accounts, general ledger, sales journals, payable Journal, etc.
• are there federal returns and depreciation schedules available
• do you own or lease the business property
• if leased who’s the landlord
Analyzing financial data for audits
The auditor will want to begin the audit with an analysis of your financial data. The analysis may begin with a review of your chart accounts and your general ledger.
This enables the auditor to gain knowledge of your accounting system in your methodology for collecting and reporting tax.
Before any financial records are released to the auditor we will examine these records prior to releasing to the auditor to ensure a minimal tax exposure.
Auditing Techniques used by Florida Sales Tax, Department of Revenue
The auditor will select an audit technique which will enable the audit to be conducted amount of time.
The technique selected will be most representative of the business for the entire audit period. More than one technique may be required during the audit depending on the business activities and it may be appropriate to use different techniques on each activity.
The Detail Sales Tax audit
A detail audit is the basic audit technique used for sales and use tax. This type of audit requires an examination of all the records for the area sales and use tax being examined.
Sampling Sales Audit Technique
Before sampling issues, the auditor must determine if the taxpayers records are adequate, but voluminous. Rule 12-3.0012(3), F.A.C., defines adequate the voluminous records. Adequate records are defined as, “books, accounts, and other records sufficient to permit a reliable determination of the tax deficiency or over payment.
Incomplete records can be determined to be adequate”.
Percent% of Error Audit Technique
As a former auditor the percentage of error method of projecting the sampling results has been proven to give the most reliable results and the most used by The Florida Department of Revenue.
The percentage of error method calculates tax based on the tax due in the sample period (not taxable amount).
It is well suited to projecting additional tax due on transactions in multiple counties that are entered into a single exhibit.
This is due to the fact that Florida is counties have many tax rates (when accounting surtax is added to the state sales tax rate) and most dealers transactions are affected by these sales tax rates.
It is not practical to stratify a dealer’s transaction by the many different rates and sample and project tax due by every rate.
Error Ratio Tax Audit Technique
The Error Ratio method is only used when the transactions entered into it are from a single County and that single County experienced a rate change during the audit period.
The Error ratio technique produces an approximation of the amount of tax not paid by the business.
This technique is based upon the assumption that the business makes errors at about the same frequency throughout the audit period.
Rate and Ratio Sales Tax Audit Technique
The rate and ratio technique is applicable in determining the amount of tax that has not been reported on sales.
This procedure is appropriate for use when auditing businesses with a high-volume and relatively low to moderately priced taxable or exempt sales (grocery/convenience stores, bars and restaurants) that do not have dependable sales records.
Rate (effective tax rate)
The bracket system, prescribed by Sections 212.12(9) and (10), F.S., used for computing the tax due on amounts less than one dollar, results in some cases in an effective tax rate in the process of or less than the basic rate.
One extreme is a taxable sale of $.10 with the tax of one cent the results in an effective tax rate of 10%. On the other hand, a sale of $1.09 results in an effective tax rate that is less than the basic rate. During the 6% tax.
A sale of $1.09 produces an effective rate of 5.5%. When the total taxable sales and told tax collections (the amounts that should have been collected) are considered, these extremes modify the basic tax collection rate.
The resulting tax rates are unique to that business because they are based on the businesses price structure and sales.
Ratio (taxable sales to total sales)
The ratio of taxable sales to total sales is usually easier to obtain than a tax collection rate. In the ideal situation for complete records are available, the taxable sales ratio can be obtained at the same time the tax collection rate is obtained.
After transactions are analyzed and recorded, the total taxable sales are divided by the total sales to obtain the taxable sales ratio.
In the absence of detailed records, the most popular technique in use is the extrapolation (create a new information from known information) of sales from the purchase records. This technique does not produce irrefutable figures and if used by the auditor can be subject to scrutiny.
Sales Tax audit Method – “Averaging”Sales Tax audit Method – “Averaging”
This method is an audit technique that works well in an audit period where there is the absence of sufficient records. When the averaging technique is used, a period is selected in which all the necessary records are available.
The records for the period are then examined in detail.
This detailed information is reviewed for errors. The total errors or tax collected on the heirs is that averaged.
The averaged amount is then scheduled over the period in which there were insufficient records.
Sales Tax Audit Methodist – Stratified Statistical Sampling
Stratified statistical sampling has been used by the Florida Department of revenue since July 2001, for businesses with adequate electronic records.
Items in the population are classified into separate subgroups or strata based on one or more important characteristics, such as a dollar value.
A sample is randomly selected and audited. Common practice.
The sample results are then projected over the applicable period with precision calculated.
Non-Statistical Sampling Audit Technique
Historically, The Florida Department of Revenue has used judge mental block sampling was stratified statistical sampling could not be performed.
Non-statistical sampling utilizes random sampling to remove the auditor and the business bias from the sampling selection process.
The sample selection process is determined by the form of the taxpayer records and how those records are physically stored.
Questions, call us today, speak to true experts. 1-866-700-1040
Received Notice of Florida Sales Tax Audit, call us today
by Fresh Start Tax | Sep 21, 2017 | Tax Help
Florida – Local Sales and Use Tax Audit Defense – With Former Agents Since 1982 + Affordable 1-866-1040
Affordable Local Sales Tax Experts, Experienced Help, Free Consult
Use former Agents to defend your Sales Tax Audits, since 1982. We know the system.
Florida sales tax audit insider tips.
Being former Florida sales and use tax auditors there are many misconceptions that the public has about sales and use tax audits.
You should know that the auditor does not know the extent of your liability if any until the Florida state auditor examines your records.
The auditor simply will only know information about your company from State of Florida internal records.
Florida – Sales and Use Tax Audit – Insider Tips from Former Agents
The books and records that you provide the auditor will be the basis for any audit findings.
We can help with your defense in an audit by controlling the records that are released to the auditor.
If the Florida Department of revenue contacted your company about a pending Florida sales use tax audit or you have already received the Florida form DR 840 – Notice of Intent to Audit Books and Records.
We can be your defense to a large assessment for sales tax, interest and penalty.
ou can call us today to review your tax audit papers so we can let you know the scope of the audit and a way to conduct the audit that is most beneficial to your business.
Processes + The Audit Process used by Florida Sales and Use Tax
The auditor will conduct a preliminary preparation for the audit prior to the actual start of the audit.
The auditor will obtain information from:
• examination of sales tax records on file with the Department of revenue
• business structure and activities from websites
• profile the Florida Secretary of State corporate website
• review of prior audits and results
• review of possible issues from the Florida tax law library
• standard industrial guides
• research information available on the Internet
• review any information in the audit found which includes the reasons the audit was selected.
The auditor will also conduct an analysis your company which will include:
• taxable sales compared to exempt sales
• taxable sales percentage
• amount of assets owned by a business
• results of prior audits
• Florida sales per federal tax returns versus Florida sales tax returns
• method of business operation
• business industry
• credits and exemptions taken
• change in volume of Florida activity
• tax rates
• use tax accrued on past sales tax returns
As a Former Florida Sales and Use Tax Auditor
As a former sales tax auditor this research and analysis provided the basis to prepare an industry-specific audit plan and pre-audit interview questions.
The “audit plan” or should I say the auditor’s plan of attack will be the auditor’s guide for picking low hanging fruit.
Depending on the industry the Florida Department of revenue has a specific audit plan for auditors to follow in order to capture any sales tax not paid or remitted.
In order to limit the tax exposure, our former auditor will conduct the entrance interview with the Florida state tax auditor.
The auditor will conduct the audit entrance interview with the sole purpose of learning about the business’s operation and establish a rapport with the contact person of the business.
In order to learn more about the business operations during this interview, the auditor may want to ask some typical questions such as:
• what is the main business activity.
• where are your customers located – any out-of-state customers, if so how do you account for the sales
• are there any other sources of income
• who completes the sales and use tax returns
• what control documents are available, such as chart of accounts, general ledger, sales journals, payable Journal, etc.
• are there federal returns and depreciation schedules available
• do you own or lease the business property
• if leased who’s the landlord
Analyzing financial data
The auditor will want to begin the audit with an analysis of your financial data. The analysis may begin with a review of your chart accounts and your general ledger.
This enables the auditor to gain knowledge of your accounting system in your methodology for collecting and reporting tax.
Before any financial records are released to the auditor we will examine these records prior to releasing to the auditor to ensure a minimal tax exposure.
Auditing Techniques used by Florida Sales Tax, Department of Revenue
The auditor will select an audit technique which will enable the audit to be conducted amount of time.
The technique selected will be most representative of the business for the entire audit period. More than one technique may be required during the audit depending on the business activities and it may be appropriate to use different techniques on each activity.
The Detail Sales Tax audit
A detail audit is the basic audit technique used for sales and use tax. This type of audit requires an examination of all the records for the area sales and use tax being examined.
Sampling Audit Technique
Before sampling issues, the auditor must determine if the taxpayers records are adequate, but voluminous. Rule 12-3.0012(3), F.A.C., defines adequate the voluminous records. Adequate records are defined as, “books, accounts, and other records sufficient to permit a reliable determination of the tax deficiency or over payment.
Incomplete records can be determined to be adequate”.
Percentage of Error Audit Technique
As a former auditor the percentage of error method of projecting the sampling results has been proven to give the most reliable results and the most used by The Florida Department of Revenue.
The percentage of error method calculates tax based on the tax due in the sample period (not taxable amount).
It is well suited to projecting additional tax due on transactions in multiple counties that are entered into a single exhibit.
This is due to the fact that Florida is counties have many tax rates (when accounting surtax is added to the state sales tax rate) and most dealers transactions are affected by these sales tax rates.
It is not practical to stratify a dealer’s transaction by the many different rates and sample and project tax due by every rate.
Error Ratio Tax Audit Technique
The Error Ratio method is only used when the transactions entered into it are from a single County and that single County experienced a rate change during the audit period.
The Error ratio technique produces an approximation of the amount of tax not paid by the business.
This technique is based upon the assumption that the business makes errors at about the same frequency throughout the audit period.
Rate and Ratio Sales Tax Audit Technique
The rate and ratio technique is applicable in determining the amount of tax that has not been reported on sales.
This procedure is appropriate for use when auditing businesses with a high-volume and relatively low to moderately priced taxable or exempt sales (grocery/convenience stores, bars and restaurants) that do not have dependable sales records.
Rate (effective tax rate)
The bracket system, prescribed by Sections 212.12(9) and (10), F.S., used for computing the tax due on amounts less than one dollar, results in some cases in an effective tax rate in the process of or less than the basic rate.
One extreme is a taxable sale of $.10 with the tax of one cent the results in an effective tax rate of 10%. On the other hand, a sale of $1.09 results in an effective tax rate that is less than the basic rate. During the 6% tax.
A sale of $1.09 produces an effective rate of 5.5%. When the total taxable sales and told tax collections (the amounts that should have been collected) are considered, these extremes modify the basic tax collection rate.
The resulting tax rates are unique to that business because they are based on the businesses price structure and sales.
Ratio (taxable sales to total sales)
The ratio of taxable sales to total sales is usually easier to obtain than a tax collection rate. In the ideal situation for complete records are available, the taxable sales ratio can be obtained at the same time the tax collection rate is obtained.
After transactions are analyzed and recorded, the total taxable sales are divided by the total sales to obtain the taxable sales ratio.
In the absence of detailed records, the most popular technique in use is the extrapolation (create a new information from known information) of sales from the purchase records. This technique does not produce irrefutable figures and if used by the auditor can be subject to scrutiny.
Sales Tax audit Method – “Averaging”
This method is an audit technique that works well in an audit period where there is the absence of sufficient records. When the averaging technique is used, a period is selected in which all the necessary records are available.
The records for the period are then examined in detail.
This detailed information is reviewed for errors. The total errors or tax collected on the heirs is that averaged.
The averaged amount is then scheduled over the period in which there were insufficient records.
Sales Tax Audit Methodist – Stratified Statistical Sampling
Stratified statistical sampling has been used by the Florida Department of revenue since July 2001, for businesses with adequate electronic records.
Items in the population are classified into separate subgroups or strata based on one or more important characteristics, such as a dollar value.
A sample is randomly selected and audited. Common practice.
The sample results are then projected over the applicable period with precision calculated.
Non-Statistical Sampling Audit Technique
Historically, The Florida Department of Revenue has used judge mental block sampling was stratified statistical sampling could not be performed.
Non-statistical sampling utilizes random sampling to remove the auditor and the business bias from the sampling selection process.
The sample selection process is determined by the form of the taxpayer records and how those records are physically stored.
Questions , call us today, speak to true experts.
Received Notice of Florida Sales Tax Audit + Affordable Local Experts+ Miami, Ft,Lauderdale, Palm Beaches
by Fresh Start Tax | Sep 21, 2017 | Tax Help
Florida – Sales and Use Tax Audit Defense – With Former Agents Since 1982 + Affordable 1-866-1040
Affordable Sales Tax Experts, Experienced Help
Use former Agents to defend your Sales Tax Audits, since 1982. We know the system.
Florida sales tax audit insider tips.
Being former Florida sales and use tax auditors there are many misconceptions that the public has about sales and use tax audits.
You should know that the auditor does not know the extent of your liability if any until the Florida state auditor examines your records.
The auditor simply will only know information about your company from State of Florida internal records.
Florida – Sales and Use Tax Audit – Insider Tips from Former Agents
The books and records that you provide the auditor will be the basis for any audit findings.
We can help with your defense in an audit by controlling the records that are released to the auditor.
If the Florida Department of revenue contacted your company about a pending Florida sales use tax audit or you have already received the Florida form DR 840 – Notice of Intent to Audit Books and Records.
We can be your defense to a large assessment for sales tax, interest and penalty.
ou can call us today to review your tax audit papers so we can let you know the scope of the audit and a way to conduct the audit that is most beneficial to your business.
The Audit Process used by Florida Sales and Use Tax
The auditor will conduct a preliminary preparation for the audit prior to the actual start of the audit.
The auditor will obtain information from:
• examination of sales tax records on file with the Department of revenue
• business structure and activities from websites
• profile the Florida Secretary of State corporate website
• review of prior audits and results
• review of possible issues from the Florida tax law library
• standard industrial guides
• research information available on the Internet
• review any information in the audit found which includes the reasons the audit was selected.
The auditor will also conduct an analysis your company which will include:
• taxable sales compared to exempt sales
• taxable sales percentage
• amount of assets owned by a business
• results of prior audits
• Florida sales per federal tax returns versus Florida sales tax returns
• method of business operation
• business industry
• credits and exemptions taken
• change in volume of Florida activity
• tax rates
• use tax accrued on past sales tax returns
As a Former Florida Sales and Use Tax Auditor
As a former sales tax auditor this research and analysis provided the basis to prepare an industry-specific audit plan and pre-audit interview questions.
The “audit plan” or should I say the auditor’s plan of attack will be the auditor’s guide for picking low hanging fruit.
Depending on the industry the Florida Department of revenue has a specific audit plan for auditors to follow in order to capture any sales tax not paid or remitted.
In order to limit the tax exposure, our former auditor will conduct the entrance interview with the Florida state tax auditor.
The auditor will conduct the audit entrance interview with the sole purpose of learning about the business’s operation and establish a rapport with the contact person of the business.
In order to learn more about the business operations during this interview, the auditor may want to ask some typical questions such as:
• what is the main business activity.
• where are your customers located – any out-of-state customers, if so how do you account for the sales
• are there any other sources of income
• who completes the sales and use tax returns
• what control documents are available, such as chart of accounts, general ledger, sales journals, payable Journal, etc.
• are there federal returns and depreciation schedules available
• do you own or lease the business property
• if leased who’s the landlord
Analyzing financial data
The auditor will want to begin the audit with an analysis of your financial data. The analysis may begin with a review of your chart accounts and your general ledger.
This enables the auditor to gain knowledge of your accounting system in your methodology for collecting and reporting tax.
Before any financial records are released to the auditor we will examine these records prior to releasing to the auditor to ensure a minimal tax exposure.
Auditing Techniques used by Florida Sales Tax, Department of Revenue
The auditor will select an audit technique which will enable the audit to be conducted amount of time.
The technique selected will be most representative of the business for the entire audit period. More than one technique may be required during the audit depending on the business activities and it may be appropriate to use different techniques on each activity.
The Detail Sales Tax audit
A detail audit is the basic audit technique used for sales and use tax. This type of audit requires an examination of all the records for the area sales and use tax being examined.
Sampling Audit Technique
Before sampling issues, the auditor must determine if the taxpayers records are adequate, but voluminous. Rule 12-3.0012(3), F.A.C., defines adequate the voluminous records. Adequate records are defined as, “books, accounts, and other records sufficient to permit a reliable determination of the tax deficiency or over payment.
Incomplete records can be determined to be adequate”.
Percentage of Error Audit Technique
As a former auditor the percentage of error method of projecting the sampling results has been proven to give the most reliable results and the most used by The Florida Department of Revenue.
The percentage of error method calculates tax based on the tax due in the sample period (not taxable amount).
It is well suited to projecting additional tax due on transactions in multiple counties that are entered into a single exhibit.
This is due to the fact that Florida is counties have many tax rates (when accounting surtax is added to the state sales tax rate) and most dealers transactions are affected by these sales tax rates.
It is not practical to stratify a dealer’s transaction by the many different rates and sample and project tax due by every rate.
Error Ratio Tax Audit Technique
The Error Ratio method is only used when the transactions entered into it are from a single County and that single County experienced a rate change during the audit period.
The Error ratio technique produces an approximation of the amount of tax not paid by the business.
This technique is based upon the assumption that the business makes errors at about the same frequency throughout the audit period.
Rate and Ratio Sales Tax Audit Technique
The rate and ratio technique is applicable in determining the amount of tax that has not been reported on sales.
This procedure is appropriate for use when auditing businesses with a high-volume and relatively low to moderately priced taxable or exempt sales (grocery/convenience stores, bars and restaurants) that do not have dependable sales records.
Rate (effective tax rate)
The bracket system, prescribed by Sections 212.12(9) and (10), F.S., used for computing the tax due on amounts less than one dollar, results in some cases in an effective tax rate in the process of or less than the basic rate.
One extreme is a taxable sale of $.10 with the tax of one cent the results in an effective tax rate of 10%. On the other hand, a sale of $1.09 results in an effective tax rate that is less than the basic rate. During the 6% tax.
A sale of $1.09 produces an effective rate of 5.5%. When the total taxable sales and told tax collections (the amounts that should have been collected) are considered, these extremes modify the basic tax collection rate.
The resulting tax rates are unique to that business because they are based on the businesses price structure and sales.
Ratio (taxable sales to total sales)
The ratio of taxable sales to total sales is usually easier to obtain than a tax collection rate. In the ideal situation for complete records are available, the taxable sales ratio can be obtained at the same time the tax collection rate is obtained.
After transactions are analyzed and recorded, the total taxable sales are divided by the total sales to obtain the taxable sales ratio.
In the absence of detailed records, the most popular technique in use is the extrapolation (create a new information from known information) of sales from the purchase records. This technique does not produce irrefutable figures and if used by the auditor can be subject to scrutiny.
Sales Tax audit Method – “Averaging”
This method is an audit technique that works well in an audit period where there is the absence of sufficient records. When the averaging technique is used, a period is selected in which all the necessary records are available.
The records for the period are then examined in detail.
This detailed information is reviewed for errors. The total errors or tax collected on the heirs is that averaged.
The averaged amount is then scheduled over the period in which there were insufficient records.
Sales Tax Audit Methodist – Stratified Statistical Sampling
Stratified statistical sampling has been used by the Florida Department of revenue since July 2001, for businesses with adequate electronic records.
Items in the population are classified into separate subgroups or strata based on one or more important characteristics, such as a dollar value.
A sample is randomly selected and audited. Common practice.
The sample results are then projected over the applicable period with precision calculated.
Non-Statistical Sampling Audit Technique
Historically, The Florida Department of Revenue has used judge mental block sampling was stratified statistical sampling could not be performed.
Non-statistical sampling utilizes random sampling to remove the auditor and the business bias from the sampling selection process.
The sample selection process is determined by the form of the taxpayer records and how those records are physically stored.
Questions , call us today, speak to true experts.
Florida Sales, Use Tax Audit + Affordable Experts + Broward, Dade County, Palm Beach
by Fresh Start Tax | Sep 21, 2017 | Tax Help
Florida – Sales and Use Tax Audit Defense – With Former Agents Since 1982 + Affordable 1-866-1040
Affordable Sales Tax Experts
Use former Agents to defend your Sales Tax Audits, since 1982.
We know the system.
Florida sales tax audit insider tips.
Being former Florida sales and use tax auditors there are many misconceptions that the public has about sales and use tax audits.
You should know that the auditor does not know the extent of your liability if any until the Florida state auditor examines your records.
The auditor simply will only know information about your company from State of Florida internal records.
Florida – Sales and Use Tax Audit – Insider Tips from Former Agents
The books and records that you provide the auditor will be the basis for any audit findings.
We can help with your defense in an audit by controlling the records that are released to the auditor.
If the Florida Department of revenue contacted your company about a pending Florida sales use tax audit or you have already received the Florida form DR 840 – Notice of Intent to Audit Books and Records.
We can be your defense to a large assessment for sales tax, interest and penalty.
ou can call us today to review your tax audit papers so we can let you know the scope of the audit and a way to conduct the audit that is most beneficial to your business.
The Audit Process used by Florida Sales and Use Tax
The auditor will conduct a preliminary preparation for the audit prior to the actual start of the audit.
The auditor will obtain information from:
• examination of sales tax records on file with the Department of revenue
• business structure and activities from websites
• profile the Florida Secretary of State corporate website
• review of prior audits and results
• review of possible issues from the Florida tax law library
• standard industrial guides
• research information available on the Internet
• review any information in the audit found which includes the reasons the audit was selected.
The auditor will also conduct an analysis your company which will include:
• taxable sales compared to exempt sales
• taxable sales percentage
• amount of assets owned by a business
• results of prior audits
• Florida sales per federal tax returns versus Florida sales tax returns
• method of business operation
• business industry
• credits and exemptions taken
• change in volume of Florida activity
• tax rates
• use tax accrued on past sales tax returns
As a Former Florida Sales and Use Tax Auditor
As a former sales tax auditor this research and analysis provided the basis to prepare an industry-specific audit plan and pre-audit interview questions.
The “audit plan” or should I say the auditor’s plan of attack will be the auditor’s guide for picking low hanging fruit.
Depending on the industry the Florida Department of revenue has a specific audit plan for auditors to follow in order to capture any sales tax not paid or remitted.
In order to limit the tax exposure, our former auditor will conduct the entrance interview with the Florida state tax auditor.
The auditor will conduct the audit entrance interview with the sole purpose of learning about the business’s operation and establish a rapport with the contact person of the business.
In order to learn more about the business operations during this interview, the auditor may want to ask some typical questions such as:
• what is the main business activity.
• where are your customers located – any out-of-state customers, if so how do you account for the sales
• are there any other sources of income
• who completes the sales and use tax returns
• what control documents are available, such as chart of accounts, general ledger, sales journals, payables Journal, etc.
• are there federal returns and depreciation schedules available
• do you own or lease the business property
• if leased who’s the landlord
Analyzing financial data
The auditor will want to begin the audit with an analysis of your financial data. The analysis may begin with a review of your chart accounts and your general ledger.
This enables the auditor to gain knowledge of your accounting system in your methodology for collecting and reporting tax.
Before any financial records are released to the auditor we will examine these records prior to releasing to the auditor to ensure a minimal tax exposure.
Auditing Techniques used by Florida Sales Tax, Department of Revenue
The auditor will select an audit technique which will enable the audit to be conducted amount of time.
The technique selected will be most representative of the business for the entire audit period. More than one technique may be required during the audit depending on the business activities and it may be appropriate to use different techniques on each activity.
The Detail Sales Tax audit
A detail audit is the basic audit technique used for sales and use tax. This type of audit requires an examination of all the records for the area sales and use tax being examined.
Sampling Audit Technique
Before sampling issues, the auditor must determine if the taxpayers records are adequate, but voluminous. Rule 12-3.0012(3), F.A.C., defines adequate the voluminous records. Adequate records are defined as, “books, accounts, and other records sufficient to permit a reliable determination of the tax deficiency or overpayment. Incomplete records can be determined to be adequate”.
Percentage of Error Audit Technique
As a former auditor the percentage of error method of projecting the sampling results has been proven to give the most reliable results and the most used by The Florida Department of Revenue.
The percentage of error method calculates tax based on the tax due in the sample period (not taxable amount).
It is well suited to projecting additional tax due on transactions in multiple counties that are entered into a single exhibit.
This is due to the fact that Florida is counties have many tax rates (when accounting surtax is added to the state sales tax rate) and most dealers transactions are affected by these sales tax rates.
It is not practical to stratify a dealer’s transaction by the many different rates and sample and project tax due by every rate.
Error Ratio Tax Audit Technique
The Error Ratio method is only used when the transactions entered into it are from a single County and that single County experienced a rate change during the audit period.
The Error ratio technique produces an approximation of the amount of tax not paid by the business.
This technique is based upon the assumption that the business makes errors at about the same frequency throughout the audit period.
Rate and Ratio Sales Tax Audit Technique
The rate and ratio technique is applicable in determining the amount of tax that has not been reported on sales.
This procedure is appropriate for use when auditing businesses with a high-volume and relatively low to moderately priced taxable or exempt sales (grocery/convenience stores, bars and restaurants) that do not have dependable sales records.
Rate (effective tax rate)
The bracket system, prescribed by Sections 212.12(9) and (10), F.S., used for computing the tax due on amounts less than one dollar, results in some cases in an effective tax rate in the process of or less than the basic rate.
One extreme is a taxable sale of $.10 with the tax of one cent the results in an effective tax rate of 10%. On the other hand, a sale of $1.09 results in an effective tax rate that is less than the basic rate. During the 6% tax.
A sale of $1.09 produces an effective rate of 5.5%. When the total taxable sales and told tax collections (the amounts that should have been collected) are considered, these extremes modify the basic tax collection rate.
The resulting tax rates are unique to that business because they are based on the businesses price structure and sales.
Ratio (taxable sales to total sales)
The ratio of taxable sales to total sales is usually easier to obtain than a tax collection rate. In the ideal situation for complete records are available, the taxable sales ratio can be obtained at the same time the tax collection rate is obtained.
After transactions are analyzed and recorded, the total taxable sales are divided by the total sales to obtain the taxable sales ratio.
In the absence of detailed records, the most popular technique in use is the extrapolation (create a new information from known information) of sales from the purchase records. This technique does not produce irrefutable figures and if used by the auditor can be subject to scrutiny.
Sales Tax audit Method – “Averaging”
This method is an audit technique that works well in an audit period where there is absence of sufficient records. When the averaging technique is used, a period is selected in which all the necessary records are available.
The records for the period are then examined in detail.
This detailed information is reviewed for errors. The total errors or tax collected on the heirs is that averaged.
The averaged amount is then scheduled over the period in which there were insufficient records.
Sales Tax Audit Methodist – Stratified Statistical Sampling
Stratified statistical sampling has been used by the Florida Department of revenue since July 2001, four businesses with adequate electronic records.
Items in the population are classified into separate subgroups or strata based on one or more important characteristics, such as a dollar value.
A sample is randomly selected and audited.
The sample results are then projected over the applicable period with precision calculated.
Non-Statistical Sampling Audit Technique
Historically, The Florida Department of Revenue has used judge mental block sampling was stratified statistical sampling could not be performed.
Non-statistical sampling utilizes random sampling to remove the auditor and the business bias from the sampling selection process.
The sample selection process is determined by the form of the taxpayer records and how those records are physically stored.
by Fresh Start Tax | Sep 15, 2017 | Tax Help
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If you have received an IRS levy or wage garnishment within 24 hours of receiving your current financial statement we can get a full release, we can represent you during an IRS tax audit, if you owe back taxes we can settle your tax debt get you in a hardship or set up a payment plan depending on your current financial statement.
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Civil Penalties, Payroll
If the IRS has found you a responsible person for the trust fund penalty, call us today for free initial tax consultation and we will walk you through the process of resolving this tax at once and for all.
As former IRS agents we set up trust fund penalties against responsible persons for corporations or businesses that owed back payroll taxes.
If a company can no longer pay their back payroll taxes, the Internal Revenue Service has the right under 6672 to set up the trust fund debt against those who are held responsible. This is called the trust fund penalty.
You’ll know if you are one of these persons because you will receive IRS form 2751 & 1153 indicating a proposed notice of assessment against you.
There are various options available. As soon as we review your case we can instantly tell you ways to help resolve your problem.
Being former IRS agents and managers we know every possible solution to remedy this tax debt. We can resolve and possibly reduce your tax obligation. When you talk to us for your free initial tax consultation we will review with you every possible option to completely and permanently resolve your tax issue.
Every tax matter and problem has a resolution strategy. Generally there is a short-term strategy in a long-term strategy.
There are various options you have for IRS tax debt relief: And We Know them All
Owing Back Taxes
Before the Internal Revenue Service makes determinations on open collections accounts they need to have a universal way to make decisions.
As a general rule, they take a current financial statement on form 433F, you can find those our website.
1. hardships, or currently not collectible,
2. payments plan, and
3. the offer in compromise, if you are a qualified and suitable candidate.
4. bankruptcy is another option.
The Process of Getting IRS Tax Debt Relief on Trust Fund Tax Debt + Payroll Tax Debt
We need to look to find out if you were truly responsible under 6672 of the IRS code. many time IRS ram rods these penalties to people who truly were not responsible for trust fund taxes.
I’ve work so many cases and being a former IRS agent IRS just tries to set these penalties up against everybody and many people do not have proper representation to fight IRS.
We will carefully review your case to find out if you were truly responsible for the trust fund penalty.
We will conduct a review to find out if there is any way that we can appeal for change the assessment of this trust fund tax.
If we feel we would’ve beat this assessment through the appellate process we can go ahead and file an offer in compromise as to doubt as to liability and appeal this assessment.
If you are responsible for the tax, IRS will take a current financial statement and make a determination based on the collectibility of the tax.
How the Internal Revenue Service will work your case if you owe the IRS tax debt.
IRS will require a 433A or 433F, an individual financial statement.
You can find that form directly on our website.
Many times the IRS uses 433F, depending were the cases in the system. Cases worked in the ACS system uses shorter version of the financial statement.
If the case is worked in the local office the revenue officer will use form 433.A
That financial statement will need to be fully documented along with bank statements, copies of checks and monthly expenses.
We will walk you through the process of how the IRS will work your case in the collection action that can possibly taken.
Will also review with you the IRS national standards program on all cases for those who owe back taxes.
Once IRS reviews your current financial statement they will make a determination and generally put you in one of two categories with the option of filing an offer in compromise.
IRS has the option to:
1.IRS determines on 40% of the cases that taxpayers are put into hardship which means they can’t pay the tax at this time. Sometimes it is called currently not collectible. Cases that are placed at currently not collectible or hardship stay in there for a period of 2 to 3 years and come back out to the field at a later time.
2. 6.5 million people enter monthly payment plans and pay a certain amount based on their current documented financial statement.
Other taxpayers file an offer in compromise to settle their case for pennies on the dollar. The offer in compromise requires a lot of skill and expertise to have accepted by the Internal Revenue Service.
What is an offer in compromise?
It is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed.
Taxpayers who can fully pay the liabilities through an installment agreement or other means, will not be eligible for a OIC in most cases.
In order to be eligible for a OIC, the taxpayer must have filed all tax returns, made all required estimated tax payments for the current year and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.
In most cases, the IRS will not accept a OIC unless the amount offered by a taxpayer is equal to or greater than the reasonable collection potential (the RCP).
The RCP is how the IRS measures the taxpayer’s ability to pay.
The RCP includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property.
In addition to property, the RCP also includes anticipated future income less certain amounts allowed for basic living expenses.
The IRS may accept a OIC based on three grounds:
• First, the IRS can accept a compromise if there is doubt as to liability. A compromise meets this only when there is a genuine dispute as to the existence or amount of the correct tax debt under the law.
• Second, the IRS can accept a compromise if there is doubt that the amount owed is fully collectible.
Doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
• Third, the IRS can accept a compromise based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
When submitting a OIC based on doubt as to collectibility or based on effective tax administration, taxpayers must use the most current version of:
1. Form 656, Offer in Compromise, and also submit Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or,
2. Form 433-B (OIC), Collection Information Statement for Businesses. A taxpayer submitting a OIC based on doubt as to liability must file a Form 656-L (PDF), Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC).
Form 656 and referenced collection information statements are available in the Offer in Compromise Booklet, Form 656-B (PDF).
In general, a taxpayer must submit a $186 application fee with the Form 656. Do not combine this fee with any other tax payments.
However, there are two exceptions to this requirement:
• First, no application fee is required if the OIC is based on doubt as to liability.
• Second, the fee is not required if the taxpayer is an individual (not a corporation, partnership, or other entity) who qualifies for the low-income exception.
This exception applies if the taxpayer’s total monthly income falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services. Section 4 of Form 656 contains the Low Income Certification guidelines to assist taxpayers in determining whether they qualify for the low-income exception.
A taxpayer who claims the low-income exception must complete section 4 of Form 656 and check the certification box.
Options: Taxpayers may choose to pay the offer amount in a lump sum or in installment payments.
A “lump sum cash offer” is defined as an offer payable in 5 or fewer installments within 5 or fewer months after the offer is accepted. If a taxpayer submits a lump sum cash offer, the taxpayer must include with the Form 656 a nonrefundable payment equal to 20 percent of the offer amount.
This payment is required in addition to the $186 application fee.
The 20 percent payment is “nonrefundable” meaning it will not be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without acceptance.
Instead, the 20 percent payment will be applied to the taxpayer’s tax liability. The taxpayer has a right to specify the particular tax liability to which the IRS will apply the 20 percent payment.
An offer is called a “periodic payment offer” under the tax law if it is payable in 6 or more monthly installments and within 24 months after the offer is accepted.
When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656.
This payment is required in addition to the $186 application fee. This amount is nonrefundable, just like the 20 percent payment required for a lump sum cash offer. Also, while the IRS is evaluating a periodic payment offer, the taxpayer must continue to make the installment payments provided for under the terms of the offer.
These amounts are also nonrefundable.
These amounts are applied to the tax liabilities and the taxpayer has a right to specify the particular tax liabilities to which the periodic payments will be applied.
Upon acceptance of a OIC, the taxpayer may no longer designate offer payments to any specific tax liability covered in the offer agreement.
Ordinarily, the statutory time within which the IRS may engage in collection activities is suspended during the period that the OIC is under consideration, and is further suspended if the OIC is rejected by the IRS and where the taxpayer appeals the rejection to the IRS Office of Appeals within 30 days from the date of the notice of rejection.
If the IRS accepts the taxpayer’s offer, the IRS expects that the taxpayer will have no further delinquencies and will fully comply with the tax laws.
The offer in compromise requires a lot of skill because reviewed by several layers of Internal Revenue Service. I should know, I am former IRS agent and teaching instructor of the offer in compromise.
Call us today for a free initial tax consultation.
We are a full service tax firm.
When you call our office you will speak to true IRS tax experts. We are the fast, friendly, and affordable professional tax firm.
Christian IRS Help + IRS Tax Debt Relief Services + Collection or Audit Problems
