A Practitioner’s Perspective

1. A Practitioner’s Perspective Presentation to Minnesota Revenue September 1, 2010 Twin Cities Tax Professionals Discussion Group

2. 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 Group

3. 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 Group

4. MN Revenue Strategic Plan Twin Cities Tax Professionals Discussion Group

5. MN Revenue Strategic Plan Twin Cities Tax Professionals Discussion Group

6. Data Warehouse Roadmap Twin Cities Tax Professionals Discussion Group

7. Quote Key • 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

8. 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 Group

9. 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 Group

10. 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 Group

11. 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 Group

12. 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 Group

13. 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 Group

14. Strategy 3 (Cont’d) • 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

15. 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 Group

16. 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 Group

17. Strategy 5 (Cont’d) • 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

18. 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 Group

19. 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 Group

20. 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 Group

21. 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 Group

22. Minnesota Tax Stakeholders Twin Cities Tax Professionals Discussion Group

23. Thank You We appreciate this opportunity. We hope it is the beginning of an on-going working relationship. Twin Cities Tax Professionals Discussion Group