• If a motor carrier disagrees with an assessment by an auditor an appeal may be considered.
• If an informal appeal process is not successful, and the taxpayer still disagrees with the assessment, a formal appeal process may be followed.
• It is important to analyze and review audit findings which will help the motor carrier to use the audit as a learning experience.

Appeals process

When a motor carrier disagrees with the assessment by the auditor, an appeal may be considered. The decision to appeal should include an analysis of the potential appeal costs versus the size of the assessment. In any appeal situation, formal or informal, all documents and correspondence must be submitted according to the jurisdiction requirements.

Before engaging in a formal appeal, the taxpayer may consider an informal appeal procedure. This will involve discussions and negotiation with the auditor. Additional supporting documentation, such as trip reports or fuel receipts that were unavailable during the audit, may be submitted to clarify missing distance data or errors.

The taxpayer may also consider a petition to the jurisdiction to waive any penalties and interest, if there was no intent to defraud. Some jurisdictions require payment of the entire assessment before any petitions may be entered, other jurisdictions may waive the penalty if there was no intent to defraud, but generally not the interest.

The petition to waive penalty or interest must be based upon the premise that there was no intention of defrauding. In most cases this involves missing miles/kilometers or incomplete recordkeeping, and not a deliberate attempt to avoid payment of taxes.

If the informal appeal process is not successful, and the taxpayer still disagrees with the assessment, a formal appeal process may be followed. This usually involves a hearing before an administrative law judge, an appeals commission, a board of appeals, an arbitration board, or whatever system the particular jurisdiction has in place.

The jurisdictions also have differing requirements on representation during the appeal process. There may be a requirement that the representative have certain qualifications, such as a license from the bar in that jurisdiction, or that he/she be a Certified Public Accountant (CPA). Each jurisdiction differs, and when appealing an assessment, the taxpayer should determine what specific representation requirements exist.

Audit summary

Analysis and review of the audit findings for systems and procedures corrections is a very useful and important step in the audit process and provides an opportunity for the motor carrier to use the audit as a learning experience. If the audit focus was primarily compliance, the suggestions offered will probably improve taxpayer compliance. Suggestions for more efficient recordkeeping may reduce assessments in future audits and make the entire process easier.

Regardless of the suggestions, they should be looked at carefully and certainly should not be ignored. In the case of International Fuel Tax Agreement (IFTA) audits, the base jurisdiction may conduct a follow-up visit to determine whether the recommendations have been implemented.

A good recordkeeping system is very important to a motor carrier faced with an audit. Pre-audit preparations can be handled easily, reports can be satisfactorily substantiated, the audit will be completed quickly, and the assessment won’t be a shocking surprise when a taxpayer has such a system in place.

A taxpayer without an adequate record keeping system may find it useful to carefully consider developing one. It is much easier to achieve compliance and avoid painful assessments with proper recordkeeping and organization.

An analysis of audit results will usually indicate that any cost associated with achieving compliance will be more than offset by a reduction in penalty and interest assessments.