Place the audit documents in the audit folder in the following order:
When an audit examination results in no adjustments, a No Tax Change audit is submitted. (Refer to the Auditing Fundamentals manual.)
Audit write-up in CATS, (Comprehensive Tax Audit System) should be utilized where feasible, including but not limited to Audit Results, P&I waiver Worksheet, Cover Letter, Audit Report, and Index to Working Papers.
Adjustments on Cigar and Other Tobacco Tax audits are scheduled on EXCEL spreadsheets. They are titled as exams, not schedules. Make sure all columns total correctly (use the SUM function). If using multiple exams, compile the results in a Summary Exam. Use footnotes to help the taxpayer follow the flow of the exams. Exams should be properly labeled. If the exam contains multiple pages, make sure the taxpayer name, number and exam name appears at the top of every page. Excel templates are available for one outlet or multiple outlets. Templates should not be altered.
The audit plan in CATS is not utilized for cigar and tobacco audits. An audit plan Word template is available for cigar and other tobacco products audits. Confirm that the taxpayer name, number and tax code appears at the top of every page.
Include any exhibits necessary to support the audit. Label exhibits as you would for sales tax. If the audit is estimated, use the Notification of Estimation for State Tax Audit. Address notifications to the person with the proper level of authority as indicated on the questionnaire. Extend statute waivers to the natural reporting date. Make sure the waiver is signed by the authorized person as indicated on the questionnaire.
List the Audit Adjustment Report and all exams, exhibits, etc. included in the audit using CATS. Make sure all exams have a distinctive name.
Complete an Audit Adjustment Report. All audit adjustments are listed in the last period of the audit. The Audit Adjustment Report is the first item listed on the Index to Working Papers. The Audit Adjustment Report should be completed using each report period, regardless of whether adjustments were made in a period. All periods audited must be shown on the Audit Adjustment Report. It should not have one total amount for the audit period.
Penalty and interest will be calculated by RPC (Regional Processing Center) and the taxpayer will be notified of those amounts when the Notification of Audit Results and audit package is mailed to the taxpayer.
Complete the P&I worksheet, in CATS, as you would a sales tax audit. Follow the guidelines in Rule 3.5 Waiver of Penalty or Interest. If penalty is over $10,000, e-mail a copy to headquarters for approval. In the section titled "Late Returns", list the actual late periods (i.e., 0504, 0605) not the number of late returns.
Complete a cover letter, in CATS, using the same form as in a sales tax audit. For sole proprietors, do not complete the name and title fields. Instead, use the taxpayer name as the entity name. The person listed in the exit conference paragraph should match the person listed in the exit conference section of the audit plan. Likewise, the agreed, disagreed or non-committal paragraph should match the exit conference section of the audit plan.
Complete the audit report, in CATS, as you would for other taxes.