taxpayer rights have expiration dates

Taxpayers have rights at the federal and state levels. Do you know what they are? Have you really looked at them? We often assume we know what the taxpayer bill of rights say, or that they don't really matter, but it's good to be reminded.

I am planning a series of blog posts covering private letter ruling request procedures by each state, but wanted to start with taxpayer rights. Since I am based in Virginia, let's start here.

In Virginia, the Taxpayer Bill of Rights are provided to guarantee that (1) the rights, privacy, and property of Virginia taxpayers are adequately safeguarded and protected during tax assessment, collection, and enforcement processes administered under the revenue laws of the Commonwealth, and (2) the taxpayer is treated with dignity and respect.

The Taxpayer Bill of Rights compiles, in one document, brief but comprehensive statements which explain, in simple, nontechnical terms, the rights and obligations of the Department and taxpayers. The rights afforded taxpayers to assure that their privacy and property are safeguarded and protected during tax assessment and collections are available only insofar as they are implemented in other sections of the Code of Virginia or rules of the Department.

The rights guaranteed to Virginia taxpayers in the Code of Virginia and the Department's rules and regulations are:

1. The right to available information and prompt, courteous, accurate responses to questions and requests for tax assistance.
2. The right to request assistance from a taxpayers' rights advocate of the Department, who is responsible for facilitating the resolution of taxpayer complaints and problems not resolved through the normal administrative channels within the Department.
3. The right to be represented or advised by counsel or other qualified representatives at any time in administrative interactions with the Department; the right to procedural safeguards with respect to recording of meetings during tax determination or collection processes conducted by the Department; and the right to have audits, inspections of records, and meetings conducted at a reasonable time and place except in criminal and internal investigations.
4. The right to abatement of tax, interest, and penalties attributable to any taxes administered by the Department, when the taxpayer reasonably relies upon binding written advice furnished to the taxpayer by the Department through authorized representatives in response to the taxpayer's specific written request which provided adequate and accurate information.
5. The right to obtain simple, nontechnical statements which explain the procedures, remedies, and rights available during audit, appeals, and collection proceedings, including, but not limited to, the rights pursuant to this Taxpayer Bill of Rights and the right to be provided with an explanation for denials of refunds as well as the basis of the audit, assessments, and denials of refunds which identify any amount of tax, interest, or penalty due and which explain the consequences of the taxpayer's failure to comply with the notice.
6. The right to be informed of impending collection actions which require sale or seizure of property or freezing of assets, except jeopardy assessments, and the right to at least fourteen days' notice in which to pay the liability or seek further review.
7. After a jeopardy assessment, the right to have an immediate review of the jeopardy assessment.
8. The right to seek review, through formal or informal proceedings, of any adverse decisions relating to determinations in the audit or collections processes.
9. The right to have the taxpayer's tax information kept confidential unless otherwise specified by law.
10. The right to procedures for retirement of tax obligations by installment payment agreements which recognize both the taxpayer's financial condition and the best interests of the Commonwealth, provided that the taxpayer gives accurate, current information and meets all other tax obligations on schedule.
11. The right to procedures for requesting release of liens filed by the Department and for requesting that any lien which is filed in error be so noted on the lien cancellation filed by the Department and in a notice to any credit agency at the taxpayer's request, provided such request is made within three years of the release of the lien by the Department.
12. The right to procedures which assure that the individual employees of the Department are not paid, evaluated, or promoted on the basis of the amount of assessments or collections from taxpayers.
13. The right to have the Department begin and complete its audits in a timely and expeditious manner after notification of intent to audit.

The key to the taxpayer bill of rights is to know them and know the procedures surrounding each right. Some taxpayer rights require action by the taxpayer to enforce the right within a specific passage of time (i.e., 30 days, 60 days or 3 years). This is specifically true in regards to protesting audit assessments and filing refund claims. Consequently, some rights have expiration dates.

They say, "knowledge is power." They also say, "the greatest gap in the world is the gap between knowing and doing." When dealing with state taxes, they couldn't be more right.  

random thoughts from your fellow state tax professional

Taking a break from working this afternoon. In the middle of doing multiple state market-based sourcing research. Earlier this week I spent time researching California apportionment and allocation rules and writing technical support. I also worked on Florida enterprise zone refund claims and other miscellaneous research.

Question for the day: what did you spend your time doing this week? what would you do differently if you could? what would you change?

My philosophy is that life is too short to be boring or do boring work. I have been a state tax consultant for 20+ years and I know what part of my work I enjoy and what part I don't. Consequently, I seek to spend more time doing what I like and less time doing otherwise.

Random thought - one of my favorite television shows is "Suits." A little sad that the season finale was this week. Looking forward to it starting again in the winter. If you enjoy "Suits" as well, drop me a line. The show can be a little tense and stressful. Nobody takes any crap from anyone, and they are constantly jumping to incorrect conclusions. However, I enjoy the creative problem solving and perspectives they execute.

I hate the 'bait and switch.' I hate it when products at the store say they solve a certain problem or perform a certain function, then you get it home and does nothing. Isn't that false advertising? How many products or services have you experienced this phenomenon with? Unfortunately, that's how it feels with state tax laws. They are so complicated to begin with, and then states pull the bait and switch after a negative court ruling. 

I leave you with this - life AND work are supposed to be fun. I hope you had a great week and don't spend your days living for the weekend.

Take care and talk to you next week.

mission impossible?

Multistate tax laws are so complicated that businesses are set up to fail, to be exposed to audit assessments, to miss out on refunds due to expired statute-of-limitations, pushed to appeal assessments because of unreasonable positions by department audit divisions, and coerced to pay computer generated notices simply because the cost of fighting outweighs the benefit. Companies are forced to obtain elaborate accounting software, put procedures in place to comply, and hire experts to plan to minimize tax and mitigate the risk of exposure. The compliance burden for multistate businesses is overwhelming.

State statutes and regulations, court cases, rulings, internal audit division policies, etc. change daily. The constant change and lack of uniformity among the states produces unintended consequences. Even years later, after statutes or regulations have been in place and businesses have complied, states may choose to change the rules again(or sometimes they change their interpretation of the same rules without actually changing the rules). To complicate matters even worse, these changes may be imposed prospectively or retroactively; whichever has the least impact on the state's revenue. Consequently, taxpayers who have relied on the state's interpretation or challenged the state's interpretation, may owe additional tax or be unable to obtain refunds they deserve.

Conclusions:

1. Tax policy must be fair and provide reasonable certainty (no bait and switch).
2. The tax professional community must have access to the best tools possible (i.e. timely and accurate information), and be able to navigate their way through the minutiae to support tax positions. 
3. Fortune 500 company tax departments are continually being required to do more with less as state tax complexity worsens. 

Mission:

1. Collaborate with tax policy organizations on policy statements, amicus briefs, studies, articles, reports, comments and testimony (positively influence state tax policy)
2. Write or review technical material to expand or build out tax research publisher libraries (build better tools)
3. Act as a 'stop-gap' independent contractor to Fortune 500 company tax departments that lack resources to accomplish a variety of projects (provide companies with a partner-level experienced resource who has low overhead and isn't bound by audit independence issues or bureaucracy, so companies can achieve desired results)

This is my mission. Is the mission impossible?

What is your mission?

I challenge you to find it. Pursue it. Engage.

Bloomberg BNA releases its 2015 state tax survey

Taxpayers are always trying to obtain certainty regarding their tax issues. Unfortunately, it is not possible to achieve 100% certainty when the facts are complex and the state's rules are grey. Consequently, the taxpayer and adviser generally review all binding authority (statutes, regulations, cases, etc.) and unbinding authority (informal guidance, etc.) to develop support for a tax position. This is why we have the lovely 'levels of assurance' such as the 'realistic possibility of success' (33%), 'substantial authority' (40%), or 'more likely than not' (> 50%).

Depending on the situation, taxpayers are commonly balancing risk and the amount of dollars to spend to chase down this elusive certainty.  Accordingly, taxpayers are trying to attain the most cost-effective and practical solution that reduces risk to an acceptable level. Thus, other factors (business, legal, financial) may determine how much effort is taken to support a specific tax position, resulting in some taxpayers choosing to default to paying more tax to avoid risk.

Bloomberg BNA released its 2015 Survey of State Tax Departments this week, which according to BBNA, clarifies each state’s position on the gray areas of corporate income tax and sales and use tax administration, with an emphasis on nexus policies. 

BBNA has added new sections addressing income and sales tax nexus for registration with state agencies, as well as sales tax nexus for drop shipment transactions. The survey also has a new focus on each state’s rules for sourcing sales factor receipts for income tax purposes. 

As I have stated in previous posts, surveys like this provide great insight into how a state will treat certain issues and fact patterns. The problem is that many answers provided by the state may not be based on actual statutes and regulations or court rulings. The answers may be based on internal policy or simply be an interpretation of a grey area (right or wrong). Regardless of the basis, the states' answers help a company formulate a conclusion.

You can download the report for FREE, just go here.

be imbalanced, but make it matter

Happy Memorial Day! 

I spend my days in the technical 'weeds' of multistate taxation, and today I felt like writing about a non-technical matter (especially, since most of you probably aren't working today).

Does success require imbalance? 

If you look at those that are successful in their career, they usually spend more time focused on it than they did on other things, such as their family. We don't like it when people sacrifice their families for their careers, yet we celebrate those who achieve success - strange? Maybe.

For years we have had discussions, seminars, books, and human resources pushing the need for 'work/life balance.' To many in the 'real world,' work/life balance seems unobtainable. Especially with our 24/7 technology. If anything, work has taken up more of our lives, not less. This is why we need to be disciplined in what we say 'yes' to. We can't say yes to everything and hope to spend our time on what matters most - it is impossible. If we do, we will be busy all the time and not accomplish anything.

I think the key to success is imbalance - doing more than what is expected. Spending more time doing something, practicing, etc. than others. However, that imbalance doesn't mean doing busy work or just being busy. It means you are working on something specific - your main objectives and priorities. Thus, when you are spending extra time on your unique goal, talent, pursuit, you will actually make progress to being the best at it.

Don't let your life be unbalanced without gaining ground. So many of us are so busy, we feel like a pin ball. Unfortunately, when that happens, we are busy, but not accomplishing anything.

Let yourself be imbalanced in a disciplined manner. Also, let yourself become imbalanced towards your family as well. The pendulum doesn't always need to swing towards work to be successful. Actually, if you say 'no' to the things that don't matter, then you will only be saying 'yes' to work that matters, giving you more time for family.

Success requires discipline, imbalance and family. When the pendulum swings towards work - make it matter.

building a sustainable state tax consulting practice takes a 'village'

what people think, but do not say

Did you ever see the movie, "Jerry Maguire"?  In the beginning of the movie, Tom Cruise (as Jerry Maguire) has a breakdown or "break-through" as he called it.  He had been working for a large sports agent firm and had grown tired of the profession, the way he treated clients, the focus on money, etc.  Hence, he woke up in the middle of the night and wrote a several page "mission statement."  The mission statement described how the firm should change everything - how it should change its focus from solely making money and treat clients like people, develop true relationships and actually care. 

The mission statement was called, "What People Think, But Do Not Say."

I have been working in the public accounting field for 20 years and most of that time I have been a state and local tax consultant.  I worked in industry at some large Fortune 500 companies and several accounting firms (large and small).  Based on my experience and from talking to my SALT colleagues at other firms, some disturbing trends exist in our profession:

1. SALT consultants tend to move from firm to firm at a high rate, with the average length of time at one firm being 2 years.
2. Accounting firms that hire SALT consultants to build SALT practices don't always know what that actually means; they don't know what it actually looks like for their size firm (or office) and target market.  They just know they want to build one.
3. SALT consultants often struggle in getting the tax and audit folks to invite them to client meetings and pull them into projects earlier rather than later.
4. Most tax and audit folks are often used to doing things themselves - hence, their first inclination is to use SALT consultants on an as needed basis or as a "help-desk."  I get it.  I am a "do it yourself" kind of guy as well.  Often times, it is a cost/benefit or materiality issue.  I understand.
5. SALT consultants struggle with their billable time getting written off by tax or audit partners because SALT consultants are often not in control of the billing process on engagements which were obtained or started by non-SALT folks.
6. Most firms recognize SALT is a growing area and need/want a SALT resource to grow their firm; however, most firms may not be able to support or sustain a full-time SALT group.

The trends listed above do not apply to every firm.  Some SALT consultants have had long careers at one firm.  This is especially common in larger firms. The trends described are just a product of reality - or economic pressures on the firm or the partners themselves.  Everyone is just trying to meet their goals in the best way they can.  With that said, it is also a fact that so many SALT practices suffer from these trends.  Hence, the question is - is there a cure? 

You have probably heard the saying - "don't keep doing the same things and expect a different result."  Well, I very much agree with that statement in this area.  I am passionate about changing these trends - in helping SALT consultants get off of the "merry-go-round." 

These trends can be overcome by building strong relationships with partners, positioning the SALT practice effectively within the firm and/or office, marketing the SALT practice effectively in the marketplace and focusing on your highest and best use - the actions that will produce the most effective results. 

Another solution for firms would be to outsource their SALT function - this would allow the firm to have access to SALT resources they need, when they need it, without having to invest a great deal upfront or year after year.

What do you think?  Have you suffered from these trends?  What solutions can you think of?

connect and build community

Join with me in building a state tax community that builds real relationships and works together to help each other resolve complex state tax problems, influence state tax policy and further our careers and profession. 

CONNECT WITH ME ON LINKEDIN

JOIN THE LEVERAGE SALT LINKEDIN GROUP