Misconception #1: Ex-auditors make good tax consultants – To be completely blunt, firms like mine are in businesses for a reason; because most auditors aren’t very good at their jobs. The rules are confusing and in most cases, they don’t take the time to really understand your business, apply the appropriate rules and audit you following appropriate procedures. If they aren’t good as an auditor, how could they possibly be good as a consultant? At ClearPath, we generally don’t hire ex-state auditors for that reason. Please be careful of those firms who tout that the reason you should hire them is because they are ex-state auditors. I’ve defended audits against many of them when they were auditors and I would not recommend them to be the expert professional that you need on your side.
Misconception #2: We do everything right, we don’t need an expert to represent us – Representing yourself in a Mixed Beverage Tax Audit is like being sued and representing yourself in court. You don’t know what you don’t know. You may have the right argument, you may have all the appropriate documentation to support your position but if the auditor looks right at you and says “NO”, what do you say next? A qualified, experienced tax consultant will know what to say next.
Misconception #3: My CPA has expert knowledge about Mixed Beverage Tax audits – Mixed Beverage tax audits are estimates with variables that require specific documentation and proof, we find that most CPAs don’t have the bandwidth for that expertise. They are experts in financial reporting and preparing federal income tax returns and most CPAs would agree that their clients benefit from partnering with an expert. Bringing an expert consultant to work with your CPA is one of the best things you can do.
Misconception #4: My last audit was a “no tax due” so this one should be the same – Recall that in 2012, the estimation procedures changed in the audit division and now results in assessments where previously there were none. Understanding the estimation procedures and the data points evaluated in the estimation is paramount to minimizing your tax due.
Misconception #5: All State and Local Tax consulting firms are the same –Some tax consulting firms hire only highly intelligent, client focused people who can solve complex problems. Some tax consulting firms hire anyone who previously worked as an auditor for the State of Texas or TABC. This audit is too important to your business and to you as an executive or owner of the business. This audit could mean the difference between making a profit this year or showing a loss and being in debt for many years to come.