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Archive for the ‘Audits’ Category

This Weekend’s Shoplifting Spree

In Audits, Just for Fun, Nexus, Tax Planning, Voluntary Disclosure Agreements on May 13, 2013 at 12:15 PM

Thief

Can you imagine how your mother would feel if she got this call:

“Hey Mom, Happy Mother’s Day!  By the way, I’m going to be a little late for dinner.  As soon as I post bail, I’ll be right over.”

Yep, there’s no better way to honor your mother on her special day!

I was at the grocery store yesterday trying to gather up some goodies so I could cook my wife a nice Mother’s Day dinner.  For some reason, I decided to pause and pay attention to my fellow shoppers for a second.

The first thing that caught my eye was an older gentlemen who was sampling grapes from the carefully-constructed pyramid in the produce department.  We eventually made eye contact and he gave me the, “What the hell are you looking at?” stink-eye.

Even though the guy was twice my age, I didn’t want to stick around in case he gets punchy when people like me stare at him too long.

As I moved toward the olive bar, I saw this disgusting example of a human being reach into the pile of marinated sun-dried tomatoes with her bare hands.  As she dangled them over her mouth, I thought this was the cue for me to leave and tell my wife that we would be enjoying Mother’s Day dinner at a restaurant this year.

While I was making my way back toward the entrance of the grocery store, I just happened to follow that same lady over to the trail mix bins.

You know what, I’m just going to let your imagination take care of figuring out what she did over there.  (You’re welcome.)

In the tax world, the value of the grapes, marinated sun-dried tomatoes, and sunflower seeds (even the ones that stuck to this woman’s hand as she repeatedly sampled from the container) would probably be deemed “de minimis.”

Could these people have gone to jail for shoplifting?

Yes.

Could someone go to jail for failing to pay a de minimis amount of tax?

Yes.

How so?

Well, you’ll have to wait to find out.  I’ll be posting a new episode of The Only Tax Podcast, where I’ll explain how you can avoid the criminal pitfalls from de minimis taxes.

Until then, consider only purchasing food that’s in a sealed container.

Five Overlooked Sales Tax Opportunities

In Audits, Automation, Compliance, Profit, Refunds, Tax Planning on April 10, 2013 at 8:56 AM

Young black / african american business woman using binoculars

 

“Set it and forget it.” 

That’s how most companies approach their sales tax compliance processes.  However, some companies have long realized the bottom line impact that can come from implementing sales tax planning strategies.  It’s my hope that you’ll want to explore the five opportunities I’ve listed below so you too can optimize your company’s bottom line.

Opportunity #1: Missed Exemptions

If your company qualifies for a sales tax exemption on certain purchases, make sure your vendors are actually honoring those exemptions.  If you “set it and forget it,” you may not realize that they’re charging sales tax despite your request for an exemption.

Opportunity #2: Audit Offsets

If you find sales tax overpayments were made during an audit period, you should ask the auditor to factor those into their overall assessment.  If you “set it and forget it,” auditors won’t go looking for those overpayments for you.

Opportunity #3: A/P Support

Give your A/P department the tools (e.g. tax matrices, cheat sheets, in-house training, etc.) to make sure they’re not processing unnecessary sales tax charges.  If you “set it and forget it,” your company’s bottom line will be trimmed each day by payments that could be as much as 9% higher than they should be.

Opportunity #4: Tax Adjustments

Make sure your sales tax returns are prepared using all necessary pieces of source data.  If you “set it and forget it,” you may be missing transactions occurring outside of your billing system that should be reducing your sales tax liabilities every month.

Opportunity #5: Bidding Blunders

If your company’s profit margins have been eroded in the past by overly aggressive bids, make sure your colleagues don’t use an overly conservative approach that anticipates more sales tax than will be required.  If you “set it and forget it,” your bloated bids will hurt your chances of having a competitive edge.

Supplemental Resource

If your company’s sales tax compliance process has been on autopilot, then I have a resource you need to check out.

Below is a link to an e-book that further breaks down these opportunities, provides case studies, and even provides a bonus opportunity that’s not mentioned above.  Plus, it outlines a simple three-step process to bring these opportunities to life at your company.  It should take about 5 seconds to download, about 5 minutes to read, and as a result it will arm you with the tools to start utilizing very powerful sales tax planning strategies.

Click Here for the Free E-Book: Sales Tax Best Practices – Five Overlooked Opportunities

Companies can no longer afford to have a “set it and forget it” mentality.  Start to incorporate these strategies into your routine and you’ll see measurable results that will help you optimize your company’s bottom line.

 

A Sweet Birthday

In Audits, Compliance on March 20, 2013 at 7:42 AM

IMG_0484

Yesterday was my wife’s birthday, so I took the afternoon off for a family adventure.  We loaded up the taxmobile and headed to our favorite cupcake bakery for a mini celebration.  (Get it?  Mini celebration….cupcakes…..)

While we’ve been to this bakery dozens of times (and the puns keep rollin’), this time was different.  I almost wanted to kneel down and kiss the floor as I walked through the doors.

You see, this bakery was in the news recently for having a sales tax assessment of a quarter of a million dollars and was days away from being shut down.  Their accountants filed three consecutive months worth of sales tax returns without including any payments.  So, they collected a quarter of a million dollars worth of sales tax, but just forgot to remit it.

A quarter of a million dollars worth of sales tax over three months?  Yep – those are some good cupcakes over there!

So, what happened?

One report stated that it was an inadvertent oversight, but it was promptly resolved and their bakery was given a clean bill of health by the DC Office of Tax and Revenue.  Had they not resolved it so quickly, the bakery would’ve been shut down and I would’ve been holding a candlelight vigil outside the storefront.

Guess what?

These types of stories come up all the time.

What’s the reason?

The law of familiarity.  When it comes to any type of tax, not just sales tax, it’s easy to go on auto pilot because of the repetitive nature of the work.

What can we do to prevent ourselves or our colleagues in the tax department from going on autopilot?

Well, you’re just going to have to tune in tomorrow for the next episode of The Only Tax Podcast to find out!!

Same tax time, same tax channel.

See you tomorrow!

Snappin’ Necks and Cashin’ Checks

In Audits, Profit, Refunds, Tax Planning, Use Tax on March 13, 2013 at 2:45 PM

Elderly Shoulder Pain

I’ll be the first to admit that I’m quick to complain, but slow to compliment.  However, that’s going to change and you can take that to the bank, Jack!

(I’m hooked on that show Duck Dynasty, so I’m channeling my inner Si Robertson.)

That being said, I want to share a compliment and send a quick shout-out to my new chiropractor, Dr. Lisa Przbysz.  I just started to get back into the routine of chiropractic care and I feel like a million bucks!

Here’s the thing, I’ve never had any back or neck problems.  Instead, I see chiropractic care as an essential element of proactive wellness.  After my first treatment, I was standing taller, there wasn’t an ounce of tension in my body, and my mind felt amazingly clear.

In that moment of clarity, I asked myself: “In what other parts of my life can I experience the high that comes from proactive action?”

As I started to chew on this question, my career naturally came to mind.  From there, I came up with three ways in which my clients could enjoy the clarity and relief that comes from proactive action:

Action #1: Check for Sales Tax Refund Opportunities Each Month.  If you wait too long to discover overpayments, they may fall out of statute and you’ll lose the chance to claim the benefit.  Plus, the time it takes to process amended returns or refund claims can be lengthy.  Set aside some time each month so you can realize the benefit immediately!

Action #2: Do Periodic Self-Audits.  In addition to scanning for sales tax refund opportunities each month, you should also do a quarterly process review to see if any sales/use tax underpayments are happening as well.  That way, you can correct those problems on your own terms before an auditor catches them first.

Action #3: Keep Tabs on Your Company.  The volume of internal e-mails and announcements you get is probably tipping the scale toward the “overwhelming” side of things.  Try to pay attention to what’s going on because you may find that a new product or service offering, merger, acquisition, or even the opening of new offices may trigger new sales tax or use tax compliance responsibilities.  Take note of them early on so you can take the necessary steps before it’s too late.

So, with those three simple steps, it’s my hope that you can use those ideas to help your company improve its sales and use tax compliance efforts.  Not only that, I also hope they can help you to look like a rock star!

(And you know what that means – rock stars cash checks.  Big ones!)

What If Don Draper…

In Audits, Just for Fun on September 20, 2012 at 10:30 PM

Source: amctv.com

What if Don Draper didn’t drink?

(Then he probably wouldn’t need to take naps in his office every day.)

What if Don Draper didn’t smoke?  

(Then he probably wouldn’t have been keeping his fingers crossed the whole time he wrote his famous “Why I’m Quitting Tobacco” letter to the New York Times.)

What if Don Draper didn’t work in advertising?

(Then he’d probably try to break into the tax business.)

WHOA!  Pump the brakes there hot rod!  Explain yourself.

If you’re not familiar with Don Draper, he’s the main character on AMC’s hit television show Mad Men.  While he may be a binge drinking chain smoker, there’s one’s character trait he possesses that’s very impressive: his ability to sell ideas.

As an advertising executive, Don Draper helps his clients make their products or services stand out in a sea of competition.  He’s “the one to beat” in the eyes of other advertising executives on Madison Avenue.

Despite his status and brilliance, he still finds himself in front of clients, coworkers, family members, and acquaintances who don’t see eye-to-eye with him.  That’s where he shines.

Here’s one of my favorite lines from Don Draper:

“There are snakes that go months without eating, and they catch something, but they’re so hungry that they suffocate while they’re eating.  One opportunity at a time.”

So, why would I assume that he would jump at the opportunity to be a tax professional if his gig as an advertising executive fizzled out?

I think he’d find similar challenges in the tax profession that drive him to succeed in the advertising business.  Here’s an example:

Tax departments often get rejected when budget requests are made for new technology, resources, or help from outside advisors.  I could see Don Draper painting an image in a CFOs mind of how these expenditures could lead to competitive advantages in the marketplace, preserve profit margins, and minimize risk.

After his eloquent speech, he’d take a long drag on his Lucky Strike cigarette and stare down the CFO with an air of confidence that would make any disagreements out of the question.

Does your tax department need new technology, resources, or help from outside advisors?  Whatever you need additional funds for, channel your inner Don Draper and explain to the CFO how the tax department isn’t an overhead expense on the income statement.

No, the tax department helps drive profit on the income statement.

Now, let me throw it back to you.  How do you sell your company’s CFO on giving adequate budgets to the tax department?  Leave your comments below and let’s share our ideas!

The Helpline

In Audits, Compliance, Tax Planning on September 19, 2012 at 2:10 PM

When I have a problem with a product I own, I usually turn to Google for help.  I’ll grab my iPhone, run a quick search, and I’ll have the solution I need in a matter of seconds.

Speaking of my iPhone, I totally broke my rule of Google diagnostics and bought the AppleCare support plan.  Since many aspects of my practice depend on how I use my iPhone (calls, e-mails, calendars, recording podcasts, writing these blog posts, Tweets, LinkedIn updates, banking, etc.), I saw it as a smart investment.

Some of my clients have recently made smart investments as well.

A new service that my firm offers is a Sales Tax Support Plan.  Think of it like Apple Care, but for sales tax questions.

Have you ever come across a sales tax question and thought, “Ugh, I don’t have the time or the energy I need to dig into this.”

With a Sales Tax Support Plan, you can have one of those “Calgon, take me away” moments (remember those commercials?).  You can call us up, pass along the question, and we’ll get back to you with a recommended course of action.

It’s that simple.

We set our Support Plan clients up on a retainer so they don’t have to worry about the hassle and red tape that comes with processing a vendor’s engagement letter.  When you have a quick question that needs immediate attention, you don’t want to mess with any of that crap!

A Sales Tax Support Plan can free you up to take care of the other 99 tasks on your daily to-do list.

Freeing up your time + Getting stuff done = Smart investment

(I’m good with math!)

Can I help you get setup with a Sales Tax Support Plan?   If so, fill out this form and I’ll get back to you lickety-split:

3 Tips for Keeping Your Desk Organized

In Audits, Compliance, Profit, Use Tax on June 10, 2012 at 10:28 PM

Yesterday, I was so frustrated with how messy my desk was.  I was seriously considering the idea of just stretching my arm out and sweeping everything onto the floor.  (The way that scene played out in my head was pretty awesome!)

Instead, I took a deep breath so I could solve the problem.  (Sorry to disappoint you if thought I was the bad### of the tax industry!)

The problem I have is that I stack things on my desk until I get to the point of feeling smothered.  It’s at that moment when everything gets put on hold so I can take the time to get my life organized again by cleaning off my desk.

I fully admit that I’m a procrastinator when it comes to keeping my desk organized.  (Step #1 of the 12-Step Program.)  Essentially, I programmed myself to feel that proactive maintenance in this area was more painful than watching the papers pile up.  (That’s going to change!)

Connecting the Dots

When I strike up conversations with people about sales taxes, one thing is consistent: they know that their companies have problems that are not getting addressed.  (Step #1 of the 12-Step Program.)

If sales taxes have any degree of connection to your job responsibilities, you may find that asking questions or dealing with unresolved issues is more painful than knowing that the problem is unresolved.

You might be asking yourself, “Wait a second, I thought I was going to get three tips for keeping my desk organized.  What gives?”

Don’t worry, here they are:

1) Problems need to be acknowledged.  Write out a daily to-do list that includes time for administrative tasks like keeping your desk organized.

P.S. – The same goes for sales tax.  If you write out the unresolved issues that need to be addressed, they won’t get shoved to the back-burner and begin to rot.  Just remember, if you let it rot….it’ll end up costing you a lot.

2) One bite at a time – that’s how you eat an elephant.  When it comes to stacks of papers, or whatever else clutters your desk, you can’t stretch your arm out and sweep it all on to the floor.  You’ve got to take it one step at a time.

P.S. – The same goes for sales tax.  The issues you and your company face on a daily basis can be tough to comprehend when looking at the big picture.  Instead, take it one step at a time.

3) Super powers belong in comic books, not in the office.  You’re spread thin these days, so be willing to enlist the help of others to keep your workflow moving along.  If there are things piling up on your desk that can be delegated out to others, go for it!

P.S. – The same goes for sales tax.  Enlisting the help of an outside resource (Cough Cough!) shouldn’t be viewed as an act of weakness.  The most powerful people in business didn’t get where they are today by doing everything themselves (despite what they want you to think).  They entered into strategic partnerships that fostered growth and success.

So there you have it.  The three tips I’ve listed above for keeping your desk organized can be remembered with the simple acronym P.O.S.

If you don’t keep your desk organized, it’ll end up looking like a P.O.S.

P.S. – The same goes for sales tax.  [If you have a snappy way to connect the dots here, drop it in the comment box below!]

Jack of all Trades

In Audits, Maryland, State-Specific, unclaimed property on May 15, 2012 at 3:20 PM

While I fancy myself as a do-it-yourself kind of homeowner, I’m not afraid to outsource certain tasks to professionals.

One service that I’m happy to outsource is pest control.  The company I use keeps Chateau Hoffman free of all unwanted guests, so I’m happy to write that check each month.

During my most recent pest inspection, the technician hit me with a left hook:

“Mr. Hoffman, would you be interested in hearing about the kitchen and bathroom remodeling services our company now offers?”

Home improvement services from a pest control company?

For a second, I thought that this might not be too crazy since their pest control work is within the home repair/maintenance industry.  That thought train lasted for about five seconds before my skepticism kicked in.

“No thanks, I appreciate the offer though.”

I had a gut feeling that the jump from pest control to kitchen/bathroom remodeling was too extreme for my level of risk tolerance.  They may be able to do it just fine, but the risk of errors is too much for me.

Connecting the Dots

I was speaking with my friend Karen Syrylo from the Maryland Chamber of Commerce recently and I learned a really interesting nugget of information.  To streamline audit operations in Maryland, sales and use tax auditors are now starting to act as unclaimed property auditors as well.

(If I just threw you a left hook, rub your eyes and re-read that last sentence.)

In some cases, taxpayers in Maryland are having auditors simultaneously do sales tax audits and unclaimed property audits.

Deja vu…this reminded me of the remodeling pitch I got from my pest control company!

Here’s the magic question: would you feel comfortable having your pest control company remodeling your kitchen?  If not, it’s probably because you’d be worried about their expertise in the area of kitchen remodeling.

The next question is: would you feel comfortable having your sales tax auditor also auditing your company’s unclaimed property activity?  If not, it’s probably because you’d be worried about their expertise in the area of unclaimed property.

Green auditors can make for a very difficult time in defending an audit.  If your organization has operations in Maryland, it may not be a bad idea to prepare for an unclaimed property audit.  If your organization is like most, you may need to draw straws and figure out who is going to take responsibility for unclaimed property in the first place.  (Most companies toss it around like it’s a hot potato.)

If your company has already been hit with a one-two punch in Maryland (a sales tax audit and a simultaneous unclaimed property audit), feel free to drop in a comment below and let us know how it went!

Nosy Neighbors

In Audits, Bankruptcy, Compliance on March 21, 2012 at 4:10 PM

 

I’ve yet to meet someone that says, “I’m really impressed with how my homeowner’s association is run.”

To be fair, governance by committee is always difficult.  Political battles are inevitable as long as each member of the committee has personal interests they’re trying to protect.

A few years back, my HOA mailed me the results of their annual property inspection.  (This was the dreaded letter that detailed the repairs they wanted me to make to my house.)

The letter stated that the front of my house was painted with an unapproved color.  The problem with that: my house is faced with unpainted brick.

I reached out to the president of the HOA and told him about the mistake.  His response?  “Not my problem.  I’m not on the inspection committee.”

Since I keep this blog “G” rated, I’ll paraphrase the response I gave him!

I reminded him that this WAS his problem since he was the president of the HOA.  Even if he wanted the inspection committee to fix the problem, he should’ve at least gotten me in touch with the people that could’ve resolved the matter.

Have you ever seen something like this at work?

I recall seeing many cases where senior-level managers turned a blind eye to problems because they felt the matters were someone else’s responsibility.

As you can probably guess, this happens regularly with sales tax issues!

While the old adage, “Nothing is certain but death and taxes” may be true, the latter has never brought upon the former.

Reaching out to someone in your organization who many be responsible for a sales tax compliance problem won’t be the demise of the company.  However, if you wait for a taxing authority to discover that problem, it could very well trigger the demise of your company (see here).

If you don’t have the time to take care of the occasional sales tax uncertainty that pops up, I’m only a phone call away!

 


Can Luck Be A Tax Planning Strategy?

In Audits, Refunds on November 14, 2011 at 12:05 AM

After coming home from a family vacation recently, there was a mountain of mail that awaited me.  Sifting through a day’s worth of junk mail is a drag, but a week’s worth is really annoying.

My annoyance quickly turned into curiosity when I saw a strange letter in the pile.

The envelope itself was made from a high-quality paper.  My name and address was obviously hand-written.  The return address was very corporate sounding.

Instead of tossing it into the junk pile, my curiosity got the best of me and I opened the letter.

As I unfolded the single sheet of letterhead, I noticed the logo at the top: US Airlines.

Wait a second?  US Airlines?  Are they a knockoff of US Airways like how Dr. Thunder is a knockoff of Dr. Pepper?

The body of the letter notified me that I was the lucky winner of two roundtrip airline tickets to anywhere in the United States.  All I had to do was call a toll-free number to collect my prize…….wait a minute!

I hit up my favorite search engine (since they don’t pay me for an endorsement yet, I’ll call it Boogle), and it turns out that this was a marketing scam perpetrated by a travel agency.

Travel agency?  Those companies still exist?  I guess desperate times call for desperate measures.

Another industry falling on desperate times is state government.  Surprise!

A client of mine got a call from an auditor recently.  Guess what, it was because the auditor thought his company was due a refund.

Wow!  An unsolicited call from an auditor that wasn’t to setup an audit.  Better yet, it was to say that they had money coming back to them!!

Just like my letter from “US Airlines,” the call came with a hitch.  The auditor wanted to swing by and make sure his calculations were correct on the potential refund.

Can you guess where this story is going?  Yep, the auditor showed up within a few days and initiated a full-blown audit with a sizeable deficiency in tow.

In the past, auditors were okay if you told them that you had to delay an audit because of other pending audits or compliance cycles.  This auditor obviously wanted to jump to the head of the line (and it worked!).

The bottom line: if you think there are refunds to be had, don’t wait for the state to voluntarily turn them over to you.  Besides, it’s more fun to track them down when you have a bald sales tax consultant by your side!

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