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A case study in cutting edge audit automation (2)


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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.

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A case study in cutting edge audit automation (2)

  1. 1. A Case Study in Cutting Edge AuditAutomation (and Notices)Monday, May 20, 2013 9:45 - 11:00 AM
  2. 2. Presented by: Blake Martin - Vice President,Head of Tax at Lincoln Financial Group andKelley Lear – Managing Director, Red MoonSolutionsCase Study inAutomationFinancial Services
  3. 3. The Audit Beast HasMutated
  4. 4. Cash Hungry Treasury andStates… Preparing for andresponding to taxexaminations is growingmore challenging everyday More information inshorter response times Global tax authorities arestreamlining theirprocesses and expandingresources
  5. 5. Requirements on the Rise Federal/state/provinceand local taxenforcement is on therise (as is thesophistication of thesetaxing authorities) Reporting requirements are expanding: FBAR,FATCA, transfer pricing disclosures, SOX rules,global developments around Uncertain TaxPositions and other tax related contingencyreserves, withholding requirements (B Notices)and more…
  6. 6. What are your peers saying?•States are hiringmore auditors.•All states tryingfor reducing auditaging.•Voluntary disclosuresare getting pitched moreby the jurisdictions.•States like NY are gettingmore and more automated.They even have onlineservice accounts.•Referrals to state taxingauthorities from othertax types have ratchetedup.•MTC audits canlast forever…
  7. 7. What are your peers saying?•Getting auditor tocommit to closing audit.•Extensive, lengthyaudit questionnaires•Extensive invoice andsales documentation (e.g.sales contracts) required byauditor•Auditor-prepared monthlyreconciliation of tax returndata vs. workpaper/G/Ldata.•AZ, TX Sales &Use nightmares•Stunningly large preliminaryassessments – double what Iexpect!!• I am seeing a lot of"divergences" from IRM,procedures, and even taxpayerrights
  8. 8. Who is Lincoln FinancialGroup?• Provider of life insurance, annuities,retirement plans, mutual funds and otherfinancial services• Fortune 500 company with over 8,000employees• Headquartered in the Philadelphia region– Principal operations also in Indiana and NorthCarolina
  9. 9. We consider the “TaxFunction” to bethroughout the company:• Corporate TaxDepartment• Law Department• Accounting• Actuarial• BusinessOperationsWhat Does our Tax DepartmentLook Like?
  10. 10. How we are structured:• Over 30 tax professionalsin 3 locations• Other stakeholders inmany more locations• IRS Team located inIndianaWhat Does our Tax DepartmentLook Like?
  11. 11. What made us take theleap into automation?• Why we did we decide toautomate?– Multi-location tax function with manyparties– Desire to increase delivery andresolution time for audit inquiries– Mail being received in multiplelocations with propmpt repliesrequired– Desire to improve controls andaccountability
  12. 12. What was our tippingpoint?• Goal to make all taxexaminations morecollaborative and much faster• Reduce exposures• Reduce conflict• Consider “Continual AuditProgram” (CAP) for federalaudits
  13. 13. 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 ofassessment– 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 andseller’s use tax)– Underpayment and Overpayments• Information Reporting– 1099’s, B Notices, Other..
  14. 14. 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
  15. 15. People, Process andTechnology 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 forevery tax type, notices, fullaudit cycle and results!
  16. 16. • 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 andtracking of audit inception throughpayment, protest and appeals(as applicable): IDR RAR NOPA or NPA 6662 Tax Claim Protest & AppealsPeople, Process andTechnology to the RescueLog andrespond toIDR’sAutomateback andforthresponsesRespond toRAR’sAutomateresponsesto NOPA’sandtrackingFinalize,and/or pay,protest orappeal
  17. 17. IRS AuditNoticesNotices Rec’din GSO MailNotices Receivedin MailEnter into NoticeLog (date stamped)Attach ScannedCopy of NoticeAutomaticallyAssigned to LeaderNotice Automation
  18. 18. Leader Reviews and Assigns toStaff (system date stamp)Staff Prepares ResourcesStaff Reviews and Responds(system date stamped)Attach Copy of CorrespondenceSent to Taxing Authority (systemdate stamped)Audit Automation
  19. 19. Attach Response if Final Noticeand Mark “Closed”Request for Addit’l Info / StaffReviews and Responds (systemdate stamped)Attach Final Notice IndicatingClosed and Mark “Closed”Attach Copy of CorrespondenceSent to Taxing Authority (systemdate stamped)Audit Automation
  20. 20. Now What Does the ProcessLook Like in the eTaxPortal?Notice Types are set upalready and have defaultrouting to “Assign To Leader”
  21. 21. 012
  22. 22. What are we learningthrough this process?• Process has to be designed foryour organization– Identify population to be managed– Communicate initial process androles– Be prepared to change the designquickly• There are many small issues you won’tinitially identify that will seem tocontinually pop up
  23. 23. What are we learningthrough this process?– Design a changeprocess to maintaincontrols• Emphasize that this is thenew (and only) process• Slow reaction toproblems will builddisillusion and resistance– Review frequently withRed Moon– Plan for the futureStep 1Step 2Step 3Review
  24. 24. What are we learningthrough this process?Results:• Better relations with taxauthorities• More accountability• Single control, no moreindividual spreadsheetcontrols• Fewer errors• Reduced interest andpenalties
  25. 25. What are we lookingforward to furtherautomating?Next Steps:• Tax Projects• Tax Developments• Tax Records Management• Governance of Tax Processes• Use of Tax Calendar
  26. 26. Thank you for reading!For more information, contact me at:Kelley LearKelley.Lear@redmoonsolutions.com941-379-7108Blake