Audits by a taxing authority are not generally a pleasant experience. Avoiding an audit is always a priority for taxpayers. Generally there is a small chance you will be audited on any return and there is nothing you can do about it. The State of MN came out saying they intended to audit all companies on sales tax once every three years and so far it seems they are following through with that. But a one in three chance is still only 33%, so how do we get to a 100% audit rate? Estate tax returns.
Estate tax returns are being looked at by agents. In our experience, every single estate tax return is being looked at by a MN agent. That’s the 100% audit rate that sounds like no fun. So what happens in a MN estate tax audit?
The agents are looking to confirm the information that is on the estate tax return and they are checking against other information available on your possible assets. Forget to report a car that has been registered with the State of MN? They are going to ask you about it. Fail to include an investment account that you received a 1099 for the year before? They are going to ask you about it. They are also going to ask for confirmation of some of the values you listed on the estate tax return like the bank accounts, the real estate values, the investment accounts, etc. Having that documentation before you file the estate tax return is critical to making the process go more smoothly. Calling the broker to find out the account value was $42,256.88 is great, but if you don’t have paper documentation of that, you aren’t going to get past the audit which is coming. Not every post has a happy ending, but if you have all the documentation before you file the return and then reply promptly to the audit, it shouldn’t be too bad.