What rights do taxpayers have during a Kansas tax audit under the 1997 Tax Equity and Fairness Act?

Plain-English summary

This is an internal Kansas Department of Revenue directive from the Office of the Secretary (Secretary John D. LaFaver), issued to all Department auditors and effective July 1, 1997. It implements Section 52 of House Bill 2105, the Kansas Tax Equity and Fairness Act of 1997, by spelling out how auditors must treat taxpayers during an audit.

The directive states that "the law requires that retailers sales tax and Kansas compensating use taxpayers be provided with audit work papers, personal or telephonic conferences, and scheduling consideration." Although the statute speaks to sales and use tax audits, the Department extends the same protections further: "These policies and directives will also apply to corporate income tax audits and any other tax audit performed by the Kansas Department of Revenue."

It sets out three concrete requirements:

1. Work papers. "Auditors shall provide to taxpayers copies of work papers compiled as a result of the audit," on or before the date the audit report is issued, with preliminary copies furnished "at the time of the exit conference." Those work papers "shall include all computational schedules generated by the auditor, as well as any narratives or other informational documents which support the final audit computations."

2. Conferences. "Auditors will review the audit findings with the taxpayer of [or] the taxpayer's representative in person or by phone before completing the audit report," documented on form AUD/35. An exit conference is held "at the end of any field audit," where the auditor explains "any known adjustments" and informs the taxpayer of "any outstanding issues to be resolved."

3. Scheduling consideration. When scheduling, the auditor "will take into account the taxpayers' normal hours of operation" and any "special personnel resource requirements," using the AUD/38 pre-audit questionnaire, which asks the taxpayer to "indicate any days, weeks, or specific dates which would be unacceptable for the auditor to begin examining your records during the next eighteen months." Auditors are told to "modify the times of their normal workday when necessary to conform to the normal work schedule of the taxpayer."

What this means for you

Businesses facing a Kansas Department of Revenue audit

You are entitled to see the auditor's work — the computational schedules and supporting narratives behind the numbers — with preliminary copies at the exit conference and final copies by the time the audit report issues. You are also entitled to a conference (in person or by phone) to go over the findings before the report is finalized, and an exit conference at the end of a field audit. And you can ask the auditor to accommodate your normal business hours and flag dates that don't work, via the AUD/38 pre-audit questionnaire.

Accountants and representatives

These protections extend to "the taxpayer's representative," so you can attend the findings conference and exit conference on your client's behalf and should receive the same work papers. Use them to check the auditor's computations before the report is completed.

Scope

Although H.B. 2105's language targets retailers' sales tax and compensating use tax, this directive applies the same work-paper, conference, and scheduling policies to corporate income tax audits and "any other tax audit" the Department performs. Internal form names (AUD/35, AUD/38) and procedures may have changed since 1997, but the underlying taxpayer protections reflect the statute.

Common questions

Q: Can I get a copy of the auditor's work papers?
A: Yes. The directive requires auditors to provide copies of the work papers — including all computational schedules and supporting narratives — by the date the audit report is issued, with preliminary copies at the exit conference.

Q: Do I get to discuss the findings before the audit report is final?
A: Yes. The auditor must review the findings with you or your representative, in person or by phone, before completing the audit report, and hold an exit conference at the end of any field audit.

Q: Can the auditor just show up whenever?
A: The auditor is directed to consider your normal hours of operation and to use the AUD/38 pre-audit questionnaire, where you can indicate dates over the next eighteen months that would be unacceptable for the audit to begin.

Q: Does this apply only to sales tax audits?
A: No. While the Act's language addresses retailers' sales tax and compensating use tax, the directive applies these policies to corporate income tax audits and any other tax audit the Department performs.

Citations and references

• Kansas Tax Equity and Fairness Act of 1997 (House Bill 2105, Section 52) — the enacting law; the directive implements its requirement that audited taxpayers receive work papers, conferences, and scheduling consideration.
• AUD/35 — the form used to document the auditor's review of the audit findings with the taxpayer or representative.
• AUD/38 (pre-audit questionnaire) — asks the taxpayer to indicate any days, weeks, or specific dates that would be unacceptable for the audit to begin during the next eighteen months.
• John D. LaFaver, Secretary of Revenue — the directive's signatory, issued from the Office of the Secretary effective July 1, 1997.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: DIR-DIRHB2105Sec52

Original ruling text

Directive

Body:

Office of the Secretary

TO: All Auditors

FROM: Secretary LaFaver

DATE: July 1, 1997

RE: Kansas Tax Equity and Fairness Act of 1997
H.B. 2105, Section 52

In order to insure compliance with the Kansas Tax Equity and Fairness Act of 1997, the following policies and directives will become effective July 1, 1997.

The law requires that retailers sales tax and Kansas compensating use taxpayers be provided with audit work papers, personal or telephonic conferences, and scheduling consideration. These policies and directives will also apply to corporate income tax audits and any other tax audit performed by the Kansas Department of Revenue.

1) Auditors shall provide to taxpayers copies of work papers compiled as a result of the audit. Copies of the work papers will be provided on or before the date on which the audit report is issued. Copies of preliminary work papers will be furnished to the taxpayer at the time of the exit conference. Work papers shall include all computational schedules generated by the auditor, as well as any narratives or other informational documents which support the final audit computations.

2) Auditors will review the audit findings with the taxpayer of the taxpayer’s representative in person or by phone before completing the audit report. This conference is to be documented on forms AUD/35. An exit conference will be held with the taxpayer at the end of any field audit. The auditor will explain any known adjustments at that time and will inform the taxpayer of any outstanding issues to be resolved.

3) When scheduling an audit, the auditor will take into account the taxpayers’ normal hours of operation and be considerate of any special personnel resource requirements. Pay particular attention to the statement “Please indicate any days, weeks, or specific dates which would be unacceptable for the auditor to begin examining your records during the next eighteen months." This statement is found in AUD/38, pre-audit questionnaire. In addition, auditors shall modify the times of their normal workday when necessary to conform to the normal work schedule of the taxpayer.

John D. LaFaver
Secretary of Revenue

Date Composed: 12/18/1997 Date Modified: 10/09/2001

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