Revenue Agent Reporting (RAR) Services
Tested team, technology, and process
Internal Revenue Service (IRS) examinations often result in changes to federal taxable income that, in turn, can require the amendment of hundreds or even thousands of state and local income tax returns that are typically due within a very short time frame. The failure to file the state amended returns in a timely manner can result in penalties, interest, and lost refund opportunities.
Helping you stay on top of your state RAR requirement
An IRS examination can impact the computation of state taxable income, modifications, and other state tax attributes. When a taxpayer receives a notice of final determination from the IRS (commonly referred to as a Revenue Agent’s Report or RAR), states require that the taxpayer (i) redetermine their state tax liabilities, taking into account the adjustments reflected in the RAR and (ii) provide notification to applicable state tax authorities regarding any related impact. There tends to be no statutory de minimis threshold, and taxpayers often are required to notify applicable states within a very short time frame (typically 30 to 90 days following the final determination of the IRS audit) by filing an amended return along with other required documentation.
The IRS continues to focus on accelerating the closing of outstanding “large-case” audits. One result of this push has been increased demands on a company’s state tax function. Already busy in-house tax departments face the following:
- The need to timely meet state requirements in order to avoid (i) state tax penalties and interest and (ii) the application of an extended statute of limitations, both of which could potentially impact a company’s cash flow, financial statements, and disclosure requirements under FASB ASC Topic 740 (formerly FIN 48)
- A significant increase in the volume of unanticipated state and local tax compliance
- Limited resources and/or competing priorities for existing resources
- A shortened compliance time frame that may arise at the most inopportune time
- The need for large-project management skills
How we can help
Deloitte understands the increased demands that multistate RAR compliance can place on your company's tax department. Our experience in providing multistate RAR services and our supporting technology can help to ease the burden associated with the state tax compliance obligations arising from IRS audits or other changes to federal income tax returns.