As a tax leader, you're responsible for navigating the complex world of tax compliance, strategy, and risk management. But even the most experienced tax directors can face unexpected audits that put the company at risk.
A government audit exposing costly mistakes often points to much deeper operational flaws or oversight. In particular, we’ve noticed seven hidden reasons that you might be flagging your company for a government audit. We’ll talk you through those and how seeking expert guidance can help you avoid these revenue-jeopardizing missteps.
Common audit causes are just the tip of the iceberg
Generally, the reasons for an audit get lumped into the same few categories. They usually stem from large tax liabilities, especially when inconsistent filings are involved. Gaps in processes, like an inaccurate tax determination matrix, can also lead to major errors that draw attention from tax authorities. And at both ends of the spectrum, overpaying or underpaying taxes can indicate inefficiency or potential evasion. Adding to the challenge, we’ve started to see software issues and automation errors cropping up more frequently, which can create discrepancies and heighten the risk of an audit.
But if we dig a layer deeper, we’ll find a number of “hidden” root causes that can compound to create these larger issues—and put tax directors at risk of an audit and firing.
1. Non-compliance with tax laws
Overlooking federal, state, or international tax regulations can lead to hefty fines and legal trouble. If a tax director fails to keep the company compliant, the financial fallout could be severe.
2. Inaccurate reporting or filing
Submitting incorrect tax filings, underreporting income, or mishandling deductions can damage both the company's finances and its reputation. Late or sloppy submissions? That’s a fast track to trouble.
3. Failure to manage tax risk
Failing to seize tax-saving opportunities or allowing costly overpayments can hurt the company’s bottom line. If they miss the mark and the company faces unexpected liabilities or audits, it could spell disaster for the company.
4. Ineffective tax planning & determination matrix
Missing opportunities for tax savings, allowing overpayment of taxes, or failing to develop an effective tax strategy can result in major financial losses for a company. Tax directors should be optimizing the company’s tax position.
5. Failure to adapt to changes in tax law
Tax laws are constantly evolving, and a tax director is expected to stay ahead of these changes. A tax director who falls behind on new regulations or misses chances to benefit from legal changes leaves the company exposed.
6. Poor leadership or management
Beyond technical expertise, the tax director must be able to lead their department effectively. Things like managing their team, maintaining relationships with other departments, or fostering a productive work environment can prevent inefficiencies that hinder the department’s success.
Stay one step ahead of an audit disaster
As we’ve seen, pitfalls like these can lead to audits, so what steps can tax directors take to protect the company? For starters, many tax directors choose to gain added support by partnering with a dedicated tax firm like Revenew. Our team steps in to support tax departments, providing expert guidance on tax law and liability, ensuring that tax directors are well-supported and the company receives substantial refunds.
And with statute limitations cutting into recovery opportunities, acting quickly is key. Revenew excels at delivering quick results with a higher sense of urgency and exceptional customer service. With a more experienced staff, Revenew is able to find larger refunds than even the Big Four accounting firms, ensuring your company maximizes its tax savings—and helping tax directors safeguard their company’s bottom line and lower their audit risks.
In a recent audit, we were able to assist a food and beverage manufacturing company that had been experiencing delays with their tax firm, which led to missed recovery opportunities. By stepping in, we helped them recover more in a shorter time frame, resulting in over $34M in potential profit recoveries. Read the full story here.
The right approach and partner can make all the difference
Taking the right approach to tax compliance, planning, and risk management can minimize the likelihood of being audited. By proactively addressing some of these hidden causes for an audit, tax directors can protect their company, but having the right partner can provide added assurance. Working with a tax firm like Revenew ensures that you have the expertise, support, and resources needed to manage tax liabilities effectively, recover missed opportunities, and reduce the overall risk of an audit.