Determine a Tax Team Charter

IT MAY BE useful to determine a tax team charter, which defines the elements of an effective tax team, evaluates the effectiveness of the tax team, determines the guidelines for planning meetings properly and ascertaining effective milestones. Use elements of the Six Sigma process in an adapted form.

The following Six Sigma processes can be adopted for the tax risk management strategy process and may prove to be useful in the strategy process:

• Quality Function Deployment (QFD) where the tax team can more effectively focus on the activities that will reduce tax risk the most and satisfy the IRS that the business is fully tax compliant, averting unnecessary tax audits and redirecting valuable resources to pursuing the mission of the business, rather than crisis managing tax disputes.

• The Cause and Effect Matrix, allowing the tax team to select, prioritize, and analyze the facts collected during the Tax Risk Management process so as to identify the problems in the business that are causing tax risk or that may cause tax risk.

• Failure Modes and Effects analysis, helping the tax team to identify and address weaknesses in the tax compliance process before they occur, developing preventative measures targeted at preventing various failure scenarios. This creates total reliability in the tax risk management Tax Risk Management process.

• Design of Experiments (DOE) being a statistical technique that includes planning, facts, analysis, and interpretation to determine the relationship between factors affecting a process and the output of that process. The special report is dedicated to the formal Tax Risk Management process designed to plan, obtain the facts, analyze, and interpret the results so that a taxpayer can ultimately determine the relationship between factors affecting the process, such as lack of proactivity, the noninvolvement of a tax team, miscommunication, not obtaining sufficient facts, being too insular, and the effect these have on minimizing tax risk.

These are all useful tools to maximize information while minimizing resources, best implemented through the tax risk management strategy process.

In accordance with Circular 230 Disclosure