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SALT TALK:  State Tax Auditors are People Too?

Posted by Wayne Berkowitz CPA, J.D., LL.M. on Aug 29, 2016 7:00:00 AM
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It is 3 p.m., Thursday, Aug. 24. My office phone rings.  Glancing over at the caller ID, I can see it is one of the many state tax departments calling me.  As I’m not trying to avoid any auditors at the moment, I decide to answer the call.  

Mr. Berkowitz, I’m Mr. X from the State of Y Department of Revenue.  I see you are going to be representing ABC LLC in its  upcoming audit.  There is a problem with the Power of Attorney authorizing you to represent ABC.  The period you indicated on the Power doesn’t coincide with the audit period.

What did I put on the Power, I ask?  The response: January 1, 2013 through May 31, 2016.  So I don’t see the problem?  

Well Mr. Berkowitz, the audit period goes through May 2018.  

Really? You do know that 2018 hasn’t happened yet?  

Mr. Berkowitz, I don’t understand, why aren’t you being cooperative?  

Mr. X, is this a new State policy to extend audits two years out into the future?  

Mr. Berkowitz, is that really necessary, and by the way, when can we set up our first appointment?  

Mr. X, please listen to what you are saying. 2018 really hasn’t happened yet.  I am not trying to give you a hard time!

This back and forth went on about three or four times until the auditor finally realized what he was saying.  He was apologetic and slightly embarrassed.  The moral of this story: auditors are people, too.  They make mistakes just like the rest of us.  They can also be calculating, kind, cruel, hardworking, lazy, intelligent, or average — Just like the mix of people you are likely to run into anywhere at any time.

As a tax practitioner, while handling any type of audit, the human element can’t be ignored.  While it may not (or may) change the outcome, it will certainly be a major component in completing an audit quickly and efficiently so as to make the process as painless as possible for the client.   Understanding the auditor and his/her  job is going to result in more meaningful requests for explanations and documentation and accordingly result in less time wasted for both sides.  Knowing whether an auditor is simply being unreasonable or just doesn’t understand your client’s business is no different than knowing whether one of your employees needs an issue explained just one more time or whether a trip to a higher authority is in order.

Questions? Contact your Berdon advisor or Wayne Berkowitz at WBerkowitz@Berdonllp.com.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises on the unique requirements of governments and municipalities across the nation.

Topics: SALT TALK

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