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Audit, post-audit and preliminary assessment
  • During the audit, it is important to remain in communication with the auditor and to be aware of any problems that arise.
  • A post-audit meeting is used to discuss preliminary audit findings and billing, assessment, penalty, interest, or refund procedures that the jurisdiction follows.
  • After the audit is completed and the official results have been presented, the carrier must spend time evaluating and reviewing the findings, which may include a preliminary assessment.

The audit

Once the audit is underway, most of the taxpayer preparation has been completed. There are no uniform guidelines for conducting the audit; each jurisdiction functions somewhat differently. The most important activity during the audit is to remain in communication with the auditor about the progress of the audit. It is also helpful to be aware of any problems that arise. For example, there are sometimes “mileage gaps” at the end of a quarter, simply because the record of these miles appears in the next quarter. If the taxpayer is available to the auditor and communicating during the audit, the necessary records from the next quarter's report can be immediately provided. It is much easier to provide additional documentation to verify distance or correct an error during the audit, than when it is completed. Periodic and regular communication during the audit may avoid an unnecessary and unwarranted assessment.

Post-audit meeting

The post audit meeting presents a critical opportunity to discuss the preliminary audit findings. This meeting must be scheduled in advance; it is not advisable to wait until the last minute, when the auditor may be in a hurry to catch a plane or to get home for the weekend.

At this time the taxpayer must request a copy of all the auditor's worksheets and spend time reviewing the preliminary audit results and findings. All questions regarding the audit procedures, methods or findings should be addressed.

The post audit meeting is also the appropriate time to discuss the billing, assessment, penalty, interest or refund procedures that the jurisdiction follows. Useful information to ask about includes assessments, timeline for paying any assessments, and appeal procedures.

If the jurisdiction audit attitude is one of encouraging compliance, the auditor will very possibly offer some recommendations and suggestions for recordkeeping enhancement. There may also be recommendations, from the auditor’s point of view, for audit compliance as well.

Carrier review of preliminary assessment

When the audit is completed and the official results have been presented, the carrier must spend time evaluating and reviewing the findings, which may include an assessment. At this point the taxpayer must make a decision to accept or appeal the findings. An assessment may be appealed if there is disagreement with the decision. If there is no disagreement, the assessment may be accepted.

When the assessment is accepted by the taxpayer, the payment should be made to the jurisdiction in a timely manner. Most jurisdictions have regulations that govern the payment of such assessments, and these regulations should have been reviewed in the post audit meeting and must be carefully followed.

Under the International Registration Plan (IRP), if the records are found to be inadequate, then there will be an assessment as follows:

  • First audit, 20 percent;
  • Second audit, 50 percent; and
  • Third audit and subsequent audits, 100 percent.

The assessment percentages refer to the percent of the total IRP fees paid for the registration period that was audited.

For International Fuel Tax Agreement (IFTA), if the base jurisdiction determines that the records produced by the carrier for audit do not, for the carrier’s fleet as a whole, meet the criterion for the adequacy of records, or after the issuance of a written demand for records by the base jurisdiction, the carrier produces no records, the base jurisdiction may impose an additional assessment by either:

  • Adjusting the carrier’s reported fleet miles per gallon (MPG) to 4.00 or 1.70 kilometers per liter (KPL); or
  • Reducing the carrier’s reported MPG or KPL, by 20 percent.