What’s My Company’s Role in a Reverse Audit?
Reverse audits provide companies with internal checks of sales and use tax determinations and procedure assessments to identify overpayments. These reviews are the best way to identify and recoup overpaid taxes, as well as learn how to stop the overpayment cycle. But what is the role of company employees in a reverse audit?
The reverse audit process typically includes the following steps:
- Review a sample of purchases to determine materiality of potential overpayments (or underpayments)
- If material overpayments are identified, continue to review additional purchases in the statute of limitation period (typically 3-4 years) to identify all overpaid sales or use taxes
- Document overpayments through schedules with supporting details (invoice copies, CAPEx requests, use tax accrual reports)
- Request and manage the refund process with the state and/or vendors
A firm, such as Cherry Bekaert, that has a team of sales tax specialists will conduct every step of the review process from the project kick-off through receipt of refunds, minimizing the company’s time and resource commitment.
“The Cherry Bekaert team worked independently and felt like an extension of the tax department. The opportunities presented were well documented and follow up was done professionally persistent. I’d recommend them as a trusted sales tax advisor to any company.”
Senior Manager, Sales and Use Tax
Aggregates and Building Material Manufacturer
Even the most thorough reverse audit team will require assistance from the company’s accounting and operations staff in order to do the most complete review possible. Cherry Bekaert requests the following support during our reverse audits:
- Data Download of AP Data, Use Tax Data
- Access to the historical invoices for each target location
- Plant tour to understand the manufacturing process
- Key contact person available to provide background on the company and sales/use tax processes, manage the project; account for the refunds received, and coordinate internal training
Be sure to find out from the firm conducting your reverse audit exactly which services are included. For example, Cherry Bekaert not only submits refund requests to the state but also manages the entire refund process until checks are received. In addition, the firm offer sales and use tax training for company personnel.
Not sure if a sales tax reverse audit is right for your company? Take a test. Download our complimentary 20 Signs It’s Time for a Sales & Use Tax Tune Up.
Reverse audits result in many benefits to a company including increased cash flow, a better alignment of internal processes with tax laws, and finally, if recommendations are implemented correctly, a reduction in future assessments. The benefits usually fair outweigh the time commitments if the reverse audit is conducted by sales tax experts who understand your industry. For more information about reverse audits, visit our website.