You received a notice of audit from the State of Connecticut Labor Department. What should you do? Follow these 5 Proven Steps to Survive a Connecticut Labor Department Audit.
1) Give a Power of Attorney to Your CPA
To have your CPA represent you in front of the Connecticut Department of Labor you will need to give them a Power of Attorney. This can be done by appointing the CPA in the notice of audit document. It can also be done by completing the Department of Labor Power of Attorney Form UC-424.
2) Change the Location of the Audit
The audit is normally conducted at the taxpayers’ place of business. With that said, the State generally allows the location of the audit to be changed to the CPA’s office. This will minimize the disruption to the business.
3) Be Prepared
Meet with your CPA prior to the audit starting. Pull together all of the documents that the auditor has requested. An issue that frequently arises is the employee versus and independent contractor question. The Internal Revenue Service (“IRS”) uses what’s called the 20 Factor Test. The State uses a narrower “ABC” Test. Employers may be accused of misclassifying employees as independent contractors. Anticipate this and plan accordingly. As an attorney once said to me, “There is nothing like a good set of facts to support your case.” Well said.
4) Be Responsive
In order to minimize our time, we request that the auditor check in with us no more than three times a day. Ideally they would ask questions first thing in the morning, just before lunch and at the end of the day before they leave. This also minimizes disruptions. When the auditor has questions, respond promptly and completely. It’s in the best interest of the taxpayer and the State to complete the audit in a timely manner. No one wants to have an audit that drags out too long.
5) Be Respectful
No one likes being audited. It takes time, incurs professional fees and likely causes stress. Having said that, the auditors have a job to do. Be respectful of them. It will go a long way.
Will you follow these five proven steps to survive a Connecticut Labor Department Audit?
Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.
