a case study in cutting edge audit automation (2)
DESCRIPTION
Lincoln Financial Group automates using eTaxPortal, AuditRoom and Notice Tracker. End to end audit automation across all tax types. Full notice tracking, workflow and document management.TRANSCRIPT
A Case Study in Cutting Edge Audit Automation (and Notices)
Monday, May 20, 2013 9:45 - 11:00 AM
Presented by: Blake Martin - Vice President, Head of Tax at Lincoln Financial Group and
Kelley Lear – Managing Director, Red Moon Solutions
Case Study in Automation
Financial Services
The Audit Beast Has Mutated
Cash Hungry Treasury and States…
Preparing for and responding to tax examinations is growing more challenging every day
More information in shorter response times
Global tax authorities are streamlining their processes and expanding resources
Requirements on the Rise
Federal/state/province and local tax enforcement is on the rise (as is the sophistication of these taxing authorities)
Reporting requirements are expanding: FBAR, FATCA, transfer pricing disclosures, SOX rules, global developments around Uncertain Tax Positions and other tax related contingency reserves, withholding requirements (B Notices) and more…
What are your peers saying?
• States are hiring more auditors.
• All states trying for reducing audit aging.
• Voluntary disclosures are getting pitched more by the jurisdictions.
• States like NY are getting more and more automated. They even have online service accounts.
• Referrals to state taxing authorities from other tax types have ratcheted up.
• MTC audits can last forever…
What are your peers saying?
• Getting auditor to commit to closing audit.
• Extensive, lengthy audit questionnaires
• Extensive invoice and sales documentation (e.g. sales contracts) required by auditor
• Auditor-prepared monthly reconciliation of tax return data vs. workpaper/G/L data.
• AZ, TX Sales & Use nightmares
• Stunningly large preliminary assessments – double what I expect!!
• I am seeing a lot of "divergences" from IRM, procedures, and even taxpayer rights
Who is Lincoln Financial Group?
• Provider of life insurance, annuities, retirement plans, mutual funds and other financial services
• Fortune 500 company with over 8,000 employees
• Headquartered in the Philadelphia region– Principal operations also in Indiana and North
Carolina
We consider the “Tax Function” to be throughout the company:
• Corporate Tax Department
• Law Department• Accounting• Actuarial• Business
Operations
What Does our Tax Department
Look Like?
How we are structured:• Over 30 tax professionals
in 3 locations• Other stakeholders in
many more locations• IRS Team located in
Indiana
What Does our Tax Department
Look Like?
What made us take the leap into automation?
• Why we did we decide to automate?– Multi-location tax function with many
parties– Desire to increase delivery and
resolution time for audit inquiries– Mail being received in multiple
locations with propmpt replies required
– Desire to improve controls and accountability
What was our tipping point?
• Goal to make all tax examinations more collaborative and much faster
• Reduce exposures• Reduce conflict• Consider “Continual Audit
Program” (CAP) for federal audits
Managing the Insanity…
• Federal Income Tax:– Federal tax examinations, Appeals and Litigation– Tax and interest re-computations– Statutes of Limitations and extensions
• State Income Tax:– Delinquency notices (unfiled returns) & notices of
assessment– Tax payer requests for change of tax information– Notice of adjustment to corporate income– Notice of late filing
• Premium Tax (State and Muni):– Notice of Class B Assessments– Underpayment and Overpayments– Tax payment process and tracking– Special Assessments and delinquency– Incorrect withholding
• Sales & Use Tax:– Letters of Inquiry with respect to a jurisdiction
(corporate business tax, state business tax and seller’s use tax)
– Underpayment and Overpayments• Information Reporting
– 1099’s, B Notices, Other..
Managing the Insanity…
• Federal W/H, FICA, FUTA, SUTA:– Overpayments and underpayments (interest and penalties)– Unemployment Insurance
• State W/H:– Notice of W/H tax due– Tax payment confirmation and tracking– Refunds requested
• Personal Property Tax:– Demand for Personal Property Tax Payment– Payment documentation and tracking– Assessment and invoices
• Real Property Tax:– Returns– Payments– Assessments and invoices– Payment documentation and tracking
• Guarantee Fund Assessments• State & Local Business Licenses
People, Process and Technology to the Rescue
• Goals• Accountability• Control• Transparency
• Designed an overall process• Identified entry points (mail, tax authorities,
etc.)• Identified actions required• Identified roles and responsibilities
• Provides online control and visibility for every tax type, notices, full
audit cycle and results!
• Full end to end automation and tracking of all notices• Utilizing eTaxPortal – NoticeTracker• Can link to audit projects as well
• Full end to end automation and
tracking of audit inception through
payment, protest and appeals
(as applicable): IDR RAR NOPA or NPA 6662 Tax Claim Protest & Appeals
People, Process and Technology to the Rescue
Log and respond to IDR’s
Automate back and forth
responses
Respond to RAR’s
Automate responses to NOPA’s and
tracking
Finalize, and/or pay, protest or
appeal
IRS Audit Notices
Notices Rec’d in GSO Mail
Notices Received in Mail
Enter into Notice Log (date stamped)
Attach Scanned Copy of Notice
Automatically Assigned to Leader
Notice Automation
Leader Reviews and Assigns to Staff (system date stamp)
Staff Prepares Resources
Staff Reviews and Responds (system date stamped)
Attach Copy of Correspondence Sent to Taxing Authority (system
date stamped)
Audit Automation
Attach Response if Final Notice and Mark “Closed”
Request for Addit’l Info / Staff Reviews and Responds (system
date stamped)
Attach Final Notice Indicating Closed and Mark “Closed”
Attach Copy of Correspondence Sent to Taxing Authority (system
date stamped)
Audit Automation
Now What Does the Process Look Like in the eTaxPortal?
Notice Types are set up already and have default routing to “Assign To Leader”
012
What are we learning through this process?
• Process has to be designed for your organization– Identify population to be managed– Communicate initial process and
roles– Be prepared to change the design
quickly• There are many small issues you won’t
initially identify that will seem to continually pop up
What are we learning through this process?
– Design a change process to maintain controls• Emphasize that this is the
new (and only) process• Slow reaction to
problems will build disillusion and resistance
– Review frequently with Red Moon
– Plan for the future
Step 1
Step 2
Step 3 Review
What are we learning through this process?
Results:• Better relations with tax
authorities• More accountability• Single control, no more
individual spreadsheet controls
• Fewer errors• Reduced interest and
penalties
What are we looking forward to further
automating?
Next Steps:• Tax Projects• Tax Developments• Tax Records Management• Governance of Tax Processes• Use of Tax Calendar
Thank you for reading!For more information, contact me at:
Kelley [email protected]
941-379-7108Blake Martin
www.redmoonsolutions.comblog.redmoonsolutions.com
www.twitter.com/redmoonsolution