Page 2 of 4: Developing a Comprehensive Tax Audit Strategy
Page 2 of 4
Developing a Comprehensive Tax Audit Strategy
It is critical to define and outline a tax audit strategy that includes a protocol for the following:
- Code of Conduct and Engagement Rules: Establish clear guidelines for behavior during the audit process, including dos and don'ts.
- Project Plan and Resource Allocation: Identify the roles and responsibilities required for an effective audit, detailing necessary resources.
- Preliminary Audit Findings: Assess potential outcomes, including the likelihood of assessments and fines.
- Voluntary Disclosure: Prepare a strategy for voluntary disclosure to mitigate risks, such as avoiding prosecution for tax fraud or joint liability.
- Information Exchange: Define protocols for responding to queries and providing necessary data.
- Final Meeting Protocol: Outline the process for concluding the audit discussions.
- Litigation and Settlement Processes: Establish clear guidelines on when and how to litigate or settle disputes.
- Deadline Management: Track critical deadlines, including objection procedures and appeals to District Courts, Courts of Appeal, and the Supreme Court.
- Implementation of Audit Findings: Develop a plan for integrating audit findings into new processes and controls.
- Documentation: Document audit findings from preliminary assessments to final conclusions, highlighting any gaps and providing explanations.
- Managing Tax Controversies and Risks
Tax controversy considerations should be integrated into the preparation of indirect tax returns. Those responsible for managing indirect tax issues should review these returns to ensure that tax positions are properly disclosed, presented, and supported by documentation. Being "tax audit ready" involves conducting simulation tax audit analyses to anticipate potential audits proactively.