Sam Brotman, JD, LLM, MBA December 27, 2013 5 min read

Tips for Franchise Tax Board Audits

In my previous article on the Franchise Tax Board audit, I talked about the importance of pre-auditing the tax return in question in order to identify any issues before your first meeting with the Franchise Tax Board auditor. In this article, I will discuss another advantage of pre-auditing a return, the importance of the presentation of records in general, and the importance of your relationship with the auditor in order to gain successful outcomes in Franchise Tax Board audits.

The Importance of Organization in Franchise Tax Board Audits

Pre-auditing the return also has the added advantage of getting all your books and records organized and ready for the auditor prior to the audit. Appearances are very important in Franchise Tax Board audits as it helps to set the tone of an audit. Think about it this way, if a taxpayer walks into an audit disorganized or with missing information, then how confident is the auditor going to be that the Franchise Tax Board tax return was prepared correctly? Not very. This is why it is essential to have all your books and records organized or as organized as possible before your very first meeting with the auditor. Even if you have to delay providing information to the auditor, it is better to spend the extra time and having it organized when I do present it to the auditor then presenting a messy file for the auditor to have to dig through. Organization in Franchise Tax Board audits is critical for successful results. In addition, having disorganized files will create more work for the auditor and create a negative feeling between you and that person. As I will cover in more detail in the next section, your relationship with the auditor is of critical importance. Providing clean and well-organized files for the auditor will go a long way to creating a good relationship with the auditor.

Relationships in Franchise Tax Board Audits

Speaking of good relationships, it is always important to keep the golden rule of Franchise Tax Board audits in mind: you win always win more flies with honey than with vinegar during the course of an audit. As such, your relationship with the auditor is paramount during the course of the audit. Maintaining a good relationship with that individual is important because it facilitates compromise and can lead to a good working relationship between you and the auditor. This is why many auditors actually working with tax professionals because tax professionals are able to take the emotion out of the audit and generally work a lot better with the auditor. Follow these same tactics to ensure your audit goes smoothly. Be professional and courteous with the auditor in all of you dealings. Be prompt to meetings and responsive in all of your responses to the auditors document requests.[1] Follow the same protocol and common courtesy that you would in any business setting and you will usually be vastly rewarded by a cooperative auditor who approaches your audit from an atmosphere of collaboration rather than one of antagonism.

I hope this series of articles has been helpful in providing you with some perspective on Franchise Tax Board audits. If you have any questions or if I can further assist you, please contact me directly via the information contained on this website.

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[1] The Franchise Tax Board Audit Manual has a lot of useful tips based on the recommendations that are given to auditors during Franchise Tax Board audits.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
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