Continually evolving state and local tax laws make it problematic for businesses to stay in compliance on a consistent basis. Our professionals team with our clients to evaluate their past compliance and current state and local tax positions to assess whether there are any refund opportunities or any possible exposures.
ZHF professionals review tax returns and payments (including taxes paid to vendors) to determine if the appropriate amount of tax has been paid. After approval from our client, we file the appropriate documentation with state and local officials in order to obtain any overpaid tax.
If exposures are discovered, we work with our clients to quantify the amount of exposure and establish strategies to resolve such exposures for the past. Most state and local governments are willing to work with businesses that come forward voluntarily to limit the amount of tax, penalty and interest that is required to be paid to bring the business into compliance. As states become more aggressive and sophisticated in identifying non-filers, the likelihood of being audited is higher than ever before. Our Tax Compliance Evaluation service allows businesses to weigh the savings of voluntarily coming forward instead of waiting to be caught.
Mitigating future exposure is also important. We work with clients to identify the root causes of the non-compliance (refunds or exposures) and then develop and implement strategies to eliminate the exposure prospectively. With proper compliance or effective tax planning, ZHF can reduce a client’s exposure and mitigate surprises in the future. To see a more detailed explanation of our tax planning services, please click the link.
To further discuss our Tax Compliance services and their benefits, please contact any one of the ZHF professionals.
Refund Check Up
Because tax laws change constantly, businesses often unknowingly overpay their state and local taxes even with the most diligent compliance. Our professionals analyze your past compliance to determine if you have any overpayments. We approach our Refund Checkup as a “reverse” audit, principally designed to identify refund opportunities. A secondary purpose of our Checkup is to identify areas of underpayment. Our Checkup can be used to analyze the following tax types: sales, use, gross receipts, income, franchise, real property, personal property, net profit and unclaimed property.
To see a more detailed explanation of our Refund Checkup, please click the link.
Our professionals have extensive experience with the Ohio Commercial Activity Tax (CAT), which included drafting the legislation, assisting with writing Ohio Department of Taxation’s (ODT), information releases and rules, and creating ODT’s audit program and audit policies. With ODT audit efforts ramping up, our Exam assists clients by examining their payments and filings to determine optimal filing positions, identify potential refunds and mitigate future exposure. Our CAT Exam is similar to our Refund Checkup and focuses our analysis on the CAT. Because the CAT is relatively new, there is little case law providing guidance relating to taxability.
If you have not filed a CAT return, our CAT Exam will help you identify whether you meet Ohio’s far reaching nexus requirements and should be filing and will quantify any potential CAT exposure. If any exposure exists, we can assist you with resolving that exposure through our Voluntary Disclosure services. To see more details about our Voluntary Disclosure services, please see below.
To see a more detailed explanation of our CAT Exam, please click the link.
Driven by the need for additional revenues, state and local tax officials are aggressively using technology to identify and audit noncomplying or undercomplying businesses. Because the risk of audit is increasing every day, businesses may want to consider voluntarily coming forward and take advantage of the voluntary disclosure programs offered by most state and local governments. Whether your business has identified a potential liability, or you would like us to determine if a liability exists (through our SALT Nexus Study, Due Diligence Analysis, Refund Checkup or CAT Exam), our professionals have extensive experience in working with state and local governments to mitigate historical tax obligations for clients that have failed to file for various taxes.
Why would any business want to voluntarily disclose unpaid liability? The clients that have completed voluntary disclosures recognize that the liability (tax, penalty, and interest) that will be paid under an audit is substantially greater than through a voluntary disclosure. In most states, the look-back period for unregistered businesses is substantially longer than the terms that can be obtained through a voluntary disclosure. In most situations, there is no statute of limitations for unfiled returns. As a result, state and local governments can assess tax liability, interest, and penalties for all open years. While voluntary disclosure terms vary from government to government, most limit the look-back period to three or four years.
In general, benefits of a voluntary disclosure include:
limited look-back periods (depending on the tax and the state, we have even been successful in obtaining prospective treatment); and
penalty waiver or penalty reduction.
Our Voluntary Disclosure service applies to the following tax types: sales, use, gross receipts, income, franchise, real property, personal property, net profit and unclaimed property.
The voluntary disclosure process typically works in the following manner:
A ZHF professional discusses and evaluates our client’s facts and circumstances. We then assess, at a very high level, whether an exposure exists and a voluntary disclosure agreement is warranted.
If a voluntary disclosure is warranted, a ZHF professional contacts the state and local government(s) on an anonymous basis (in those states that allow an anonymous request) to secure a voluntary disclosure number. This step is critical in protecting the client from being audited by the government before the following steps are completed. If contacted for audit after we receive the voluntary disclosure number, the audit will not commence as the client has entered the voluntary disclosure process. Further, the anonymous approach does not commit the client to filing if for some reason the client does not wish to proceed.
We work with the client to quantify the amount of tax that is owed for the limited look-back period and prepare any documentation that is necessary to support the calculations;
Assist the client with completing the terms of the voluntary disclosure;
Disclose the client, returns and liability to finalize the voluntary disclosure; and
Assist the client with understanding the requirements for filing prospectively.
Due Diligence Analysis
If your business is considering purchasing another business, you need to be aware of any possible state and local tax liabilities and exposures of the seller. Depending on the nature of the tax or the form of the transaction, the purchasing company may assume the liability of the seller.
Businesses planning to sell their operations can also benefit from this service by gaining an understanding of the possible issues the purchaser may uncover as part of the purchaser’s due diligence review. Sellers can use our Due Diligence Analysis to identify any problems prior to the sale so that steps can be taken to reduce the state and local tax issues, lower any hurdles or roadblocks to the sale, and maximize the purchase price.
Our Due Diligence Analysis focuses on determining where a business (for the seller or the purchaser) has underpaid sales, use, gross receipts, income, franchise, real property, personal property, net profit, or unclaimed property.
SALT Nexus Study (SNS)
As state and local governments look for more revenue, one group they continue to aggressively target is out of state businesses. Nexus is the minimum contact required between a business and a state or local government before a business can be subjected to that government’s tax filing requirements. State and local governments continue to assert nexus for businesses with little or no physical contact with that government. While the power of state and local governments to impose taxes on out of state businesses is limited by the U.S. Constitution, this limitation has not stopped them from aggressively pursuing this issue. To make matters more complicated, states and localities have taken different approaches as to what types of activities create nexus, particularly for non-sales and use taxes.
SNS is designed to review a client’s filing history, current business operations (including products, services, locations, and sales channels), and future business plans to determine where a client has sufficient nexus to be required to file tax returns. Our professionals understand the overriding principles of nexus and have experience dealing with the maze of state and local nexus laws. Once we determine in which states and localities a business has nexus, we estimate the potential tax exposure. SNS focuses on the following tax types: sales, use, gross receipts, income, franchise, and net profit.
As a law firm, our analysis is protected by the attorney client privilege. We have the ability to also work with businesses to draft contracts and employee rules that can reduce the risk of future nexus exposure.
Once SNS is completed, we assist our clients with resolving any potential liability through our Voluntary Disclosure services.
See above for an explanation of our Voluntary Disclosure services.
We work with clients to provide a customized, sales and use tax training program specific to the client’s industry and business environment. Clients benefit by training sales, purchasing, or tax staff on the proper treatment of sales and use tax relating to the business’ sales or purchases. By properly complying, the business can avoid tax overpayments and unexpected tax liabilities in the future.
Tax Compliance Matrix
ZHF professionals work with clients to develop a compliance matrix that the client can use as a tool to improve their tax compliance for sales, use, gross receipts and income taxes. The client’s purchasing, accounting and/or tax personnel can use the matrix to increase tax compliance. The compliance matrix can be created based on a high level analysis of the tax laws or can be created with a client’s unique circumstances (vendors, products, accounts, etc.). The matrix can be a simple document, an electronic spreadsheet or database, or integrated into the client’s accounting software. By properly complying, the business can avoid tax overpayments and the unexpected tax liabilities in the future.