A Practitioner’s Perspective

Presentation to Minnesota RevenueSeptember 1, 2010

Twin Cities Tax Professionals Discussion Group1

Twin Cities Tax Professionals Discussion Group

Organized August 2007

Purpose: Provide tax practitioners a forum to discuss tax issues and resolutions while maintaining high ethical standards.

Members: 91 tax professionals CPAs EAs Other tax professionals Sole practitioners to large Twin Cities firms

Twin Cities Tax Professionals Discussion Group2

Today’s Topic “If we, the practitioners, were the Minnesota Tax Auditors, what changes to current audit practices and procedures would we recommend to promote more efficient and effective audit resolution?”

Twin Cities Tax Professionals Discussion Group3

MN Revenue Strategic Plan

4Twin Cities Tax Professionals Discussion Group

MN Revenue Strategic Plan

5Twin Cities Tax Professionals Discussion Group

Data Warehouse Roadmap

6Twin Cities Tax Professionals Discussion Group

Quote Key

7

Quotes from MN Revenue Strategic Plan are in green.

Quotes from Data Warehouse Roadmap are in blue.

All other information is our commentary.

Twin Cities Tax Professionals Discussion Group

Introduction Minnesota Revenue Mission

Statement Make the revenue system work well for

Minnesota.

Minnesota Revenue Vision Everyone pays the right amount: no

more, no less.

Twin Cities Tax Professionals Discussion Group8

Strategy 1 We will identify and address patterns of

noncompliance. Focus compliance efforts on those who deliberately

evade the tax laws, not on those who make an effort to “get it right.”

Matching Issues Closely monitor third party reporting requirements

Identify more non-reporters and under-reporters (e.g. construction contractor reporting requirements)

Cross reference “subcontractor” line items with Form 1099 filings

Compliance Issues Match tax filings to business registration Cross-reference within Revenue and other state agencies

Twin Cities Tax Professionals Discussion Group9

Strategy1 (Cont’d) We will identify and address patterns of

noncompliance.

Taxpayer Selection Redirect focus to those who deliberately evade the tax

laws Visit sites in non-audit capacity

When errors are made don’t assume they are intentional

Industry Selection Concentrate on non-compliant industries Cover all industries

Tax Preparers Focus on questionable preparers Publicize preparer enforcement actions

Twin Cities Tax Professionals Discussion Group10

Strategy 2 We will work to ensure that all citizens receive

the best possible services and information.

Taxpayer Education Focus Business start-ups

Webinar for all new business taxpayers (modeled after Federal student loan webinar)

Initial audits Focus on education

Continue and expand taxpayer education during audits Focus on long-term compliance Assist taxpayers in developing tools for compliance

Twin Cities Tax Professionals Discussion Group11

Strategy 2 (Cont’d) We will work to ensure that all citizens receive

the best possible services and information.

Correspondence Accurate and professional Reasonable and easy to understand timelines Clear, concise, and consistent Secure e-mail option Supervisor’s name and contact information

Additional Tax Season Assistance Auditors assist with phones/e-mails from January to

April Complete previously started audits during this time

Twin Cities Tax Professionals Discussion Group12

Strategy 3 We will deploy systems and processes that

help us keep pace with taxpayer and employee needs and expectations.

Develop standards of expectation for the audit process Standardize response times for both sides Respect among all parties

Avoid sudden deadlines

Plan the audit and document the information request prior to initial meeting Assess the complexity of the taxpayer and tax topics Tailor document requests to specific taxpayer

Twin Cities Tax Professionals Discussion Group13

Strategy 3 (Cont’d)

14

We will deploy systems and processes that help us keep pace with taxpayer and employee needs and expectations.

Auditor training in specific industries

Establish a method for approval of changes in procedures adopted in response to audit findings to increase future compliance

Twin Cities Tax Professionals Discussion Group

Strategy 4 We will identify and recommend changes to

align the revenue system with economic activity. Goal: Find productive smaller cases for entry-level

auditors and to reduce our number of no change audits.

Reconsider this goal Skews sample size to smaller tax cases

Low cost-benefit

Schedule “shadow” audits at larger companies to train Revenue employees Expands training of entry-level auditors

Twin Cities Tax Professionals Discussion Group15

Strategy 5 We will provide a flexible, supportive and

rewarding environment for our workforce.

Be aware of workloads Revenue employees Taxpayer Taxpayer representatives

Twin Cities Tax Professionals Discussion Group16

Strategy 5 (Cont’d)

17

We will provide a flexible, supportive and rewarding environment for our workforce.

Specific education suggestions Mentor new auditors Take advantage of outside continuing education Increase training prior to solo fieldwork Assign audits based on areas of expertise Emphasize professional communication skills Include federal tax laws and treaties

Twin Cities Tax Professionals Discussion Group

Strategy 6 We will ensure that our systems and practices

protect the privacy and security of taxpayers.

Power of attorney Continue willingness to be cooperative Send notices to POA automatically Direct contacts to POA only

Twin Cities Tax Professionals Discussion Group18

Strategy 7 We will identify and adapt to changes in

technology, the economy and demographic trends.

Website Current website is superior to most Expand use of secure portals Pursue system of E-services similar to IRS

Twin Cities Tax Professionals Discussion Group19

Strategy 8 We will identify benchmarks to measure our

success when setting goals and making decisions.

Measure the effectiveness and cost of activities, and shift resources to those that demonstrate the greatest success in achieving our mission.

Expand emphasis beyond easy targets

Make an effort to avoid appeals Increase efficiency by resolving issues during audit process Allow for give and take Weigh benefit of resolution against cost of appeal

Twin Cities Tax Professionals Discussion Group20

Summary Minnesota Revenue Mission

Statement Make the revenue system work well for

Minnesota.

Minnesota Revenue Vision Everyone pays the right amount: no

more, no less. Current legislative initiatives concentrate on audits as

revenue collection tools Contrary to “no more, no less” philosophy

Twin Cities Tax Professionals Discussion Group21

Minnesota Tax Stakeholders

22Twin Cities Tax Professionals Discussion Group

Thank You

23

We appreciate this opportunity.

We hope it is the beginning of an on-going working relationship.

Twin Cities Tax Professionals Discussion Group