Payroll Tax Field Audit

Legal and tax advice in payroll tax field audits

Payroll tax law is a complex area of the law, which has many pitfalls for employers. Many regulations in payroll tax law are continuously modified. Additionally, a company owner is permanently involved in the many other concerns of his business, which may result in a certain degree of negligence creeping into his compliance with payroll tax laws. Payroll tax auditors are aware of this, which often results in back taxes being assessed as a result of intensive investigations. When a payroll tax audit is ordered, the company owners should be even more eager to identify the pitfalls entailed by these audits and bring the audit to a satisfactory conclusion. Our tax law specialists in Cologne competently and efficiently support company owners in payroll tax audits. Our practical experience in this area stems from the former employment of our tax law specialists with the Tax Authority.

Facts about payroll tax audits

Opinion of LHP Attorney on the definition of payroll tax field audit and the statutory provisions, opportunities for legal protection and recommended conduct during an audit. Checklist for an audit order.

1. What is a payroll tax field audit?

2. What conduct is recommended for the company?

If it becomes obvious, that a significant amount of clarification will be required, it is best to instruct a tax law specialist. Due to the specific professional qualifications needed, a reasonable remuneration must be allowed for an experienced tax law specialist. At the bottom line, this expenditure will be considered a good investment by the company owner, if the tax law specialist is able to assist him in tricky situations arising during a payroll tax field audit. On the basis of their practical experience, our tax law specialists in Cologne can efficiently assist company owners in the development of a strategy for payroll tax field audits and provide competent support during the audit. It is always helpful, if the adviser himself was formerly employed with the Tax Authority.

The company owner should inform his employees about the date on which the audit commences and sensitise them in respect of the manifold consequences that any conversation with the payroll tax field auditor may entail. Rash utterances in seemingly harmless conversations with the auditor may result in nasty surprises for the company. For example, a seemingly private conversation about the last company excursion may lead to the auditor assuming significant untaxed fringe benefits.

The company should assign a specific contact person, in order to channel the communication with the field editor. It needs to be decided on a case-by-case basis, if this person should only accept the auditor’s questions and convey them to the company management. This way, the management has enough time to consult with a tax law specialist and then respond to the auditor’s questions in an appropriate manner.

There are usually two weeks between the receipt of the audit notice and the actual commencement of the audit, which allows for adequate organisational preparations by the company, e.g. to prepare a workstation for the auditor. The documentation required in the payroll tax field audit should be collected ahead of the audit.

Comment by the tax law specialist: If the auditor initially foreshadows an audit over the telephone and no notice of audit has been sent yet, this provides a final window of opportunity to submit a voluntary self-disclosure which avoids a criminal penalty. A voluntary self-disclosure by the company is excluded once the notice of audit is received by the company or a culpable act becomes known to the Tax Authority by other means.

3. Checklist for an audit notice.

4. Conduct during a tax audit

5. What is the procedure for concluding the audit?

6. Tax assessment notices based on the audit

LHP Attorneys and Tax Advisers
Complex area of payroll tax law: In payroll tax field audits, it comes down to the best possible preparation. Our experience as tax law specialists and advisers in Cologne assists you in payroll tax field audits.