One of the reasons I love my job is that I like talking to my clients—getting to know them and their business. Most business owners do not know a great deal about taxes in Texas and how they are applied to individual businesses so I feel like I can help them.
Preparing for the Audit
I enjoy helping clients traverse the stress and unknown of a sales tax audit. Yesterday, I was in an entrance conference with an auditor for the State of Texas. It was fairly uneventful. My client is a small pool builder who creates beautiful outdoor spaces for his customers. His records are good, he has job files complete with all the right documentation. Each job file contains the contract, invoices to the customer for percentage payments, contracts with sub-contractors, invoices from the subs, change orders, and material purchase invoices. While his record keeping is stellar, unfortunately, he didn’t fully understand the tax laws as they apply to his business. He doesn’t use QuickBooks and he doesn’t keep anything electronically. So, I arrived at the Entrance Conference with four small banker storage boxes. One for each year of the audit. Each box had that year’s income tax return, bank statements, vendor files, and job files.
I spoke with the auditor to explain their business. They only do residential pools. They do about ten to twelve a year. They don’t have anything electronic and I’m sorry, I know that would make her job easier but this is what we have. The audit should be fairly easy for her to move through but I’ll be there all day if she needs anything. The client has some exposure for a tax assessment due to his misunderstanding of how the laws applied to him but of course, I don’t offer that information to the auditor. That part is her job. To find the exposure. My job is to represent my client, make sure the auditor follows the policies and procedures as set forth by the Comptroller and the State of Texas and to insure that she applies appropriate tax law and to argue against inappropriate application of the laws and rules. My job is also to make sure that the audit moves along at an appropriate pace and that means answering her questions in a timely manner and getting her any additional documentation that may be warranted. I’m pretty good at what I do so I have considered everything that she might need and have that already prepared for her. If there is additional information or documentation that she needs that I haven’t considered, it is my job to work with my client to provide that to the auditor as soon as possible so the process can continue smoothly.
State Auditors Appreciate a Tax Consultant Who Knows the Client’s Business
At the end of the day, the auditor was packing up and remarked that it was so nice to work with a consultant who knows something about their client. She said there are so many consultants that you can tell don’t even talk to their clients. They show up with boxes of records but really don’t know anything about the records, don’t know anything about their client’s business, and can’t answer the simple questions the auditor needs answered in order to conduct the audit. She said she feels like they just throw the records at her and she’s left to figure it out on her own.
Now, this might be a strategy. I believe there are consultants out there who take the approach that if I make this hard on the auditor, maybe they’ll just give up, not try very hard, and the assessment will be less and somehow they will have helped their client “skirt the process”. This is not my experience following situations like this. I have been hired many, many times in the past to help clients reduce their audit after they’ve hired another consultant, consulting firm, or their CPA. The audit is a mess, there are transactions scheduled on the audit that never should have been scheduled had the consultant been involved and in step with what the auditor was doing. Guiding an auditor through the audit is one of the most important services a consultant can offer to their client.
Brown Goertz & Co. provides businesses of all sizes, sales & use tax and mixed beverage tax consulting—specializing in tax audit defense and tax reduction strategies. BG & Co. tax specialists help businesses mitigate risks when faced with an audit. Our experts work diligently and tenaciously to ensure our clients’ audits result in the lowest possible assessment. It takes an expert to navigate the Texas tax audit process and BG & Co. consultants are the experts.