Best Practices for Creating, Maintaining, And Protecting State Income Tax Audit Files

Introduction This decade has brought significant change to the legal landscape facing large, multistate taxpayers. The Sarbanes-Oxley Act of 2002 created sweeping rules that increased financial oversight and forced taxpayers to reevaluate the provision of non-audit services by public accounting firms. Management must now evaluate income tax positions for financial statement purposes using the heightened more-likely-than-not standard of FASB Interpretation No. 48 (FIN 48). These changes have led taxpayers to create and maintain more detailed documentation to support their income tax return positions.