Reverse Income Tax Audit
Strengthen your tax position and recover your overpaid state income taxes
Despite the best intentions, it can be difficult for companies to ensure proper tax compliance across multiple states and jurisdictions. Uncorrected process errors can build up over months, or even years, impacting cash flow and financial statements. Common examples of these errors include failure to take available credits or deductions, incorrect tax rate or apportionment factor calculation based on special industry provisions, tax returns filed without a nexus requirement and/or improper net operating loss treatment. In some cases, these errors can reveal opportunities for business tax recovery, while other times, they may expose your business to audits and penalties. In all cases, a reverse income tax audit can shine light on process improvements that may improve the overall precision of your state income tax compliance function while generating cash tax and effective tax rate savings.
In our experience, audits that focus on state income tax recovery are especially beneficial to companies with any of the following:
- Large state income or franchise tax liabilities
- Recent participation in a merger, disposition or other transaction
- Recent changes in business model or locations
- Frequent changes in tax personnel or leadership turnover
- Current or recent state income tax audit
Remember, the state is only tasked with identifying underpayments during an audit. By conducting a reverse income tax audit, companies may also be able to reclaim overpaid tax–and the resulting refunds can help offset any liabilities assessed by the state. Our reverse income tax audit process is efficient and orderly, requiring minimal time from your personnel.
Learn more about how RSM can aid in business tax recovery with a reverse income tax audit. We can help you discover where your processes can be improved.