If you have received a Reemployment Tax (RT) audit notice from the Florida Department of Revenue (FDOR), then you probably thought this would be a somewhat limited audit involving employment records. You would have been correct up until earlier this year.
Generally starting this year, the FDOR has issued RT audit notices but has asked for records well beyond the scope of employment and wages. When questioned on the basis for arguably broad and irrelevant information requests, FDOR employees have responded that the they have been authorized by the federal government to oversee RT and can ask for whatever records they want. Any somewhat specific reference to legislative authority routinely cites to the statutory authority to audit taxpayers.
However, the Department’s response leaves a lot of room for question. Is it possible that legislative silence allows the FDOR to do whatever it wants? Is that how the government operates? The FDOR apparently does believe that it has complete discretion based on “big brother” having it look over its affairs with Florida businesses.
Chapter 443 of the Florida Statutes (F.S.) governs reemployment assistance. Within this chapter, section 443.1316, F.S., addresses the Department of Economic Opportunity (DEO) contracting with FDOR to “perform the duties of the tax collection service provider and provide other reemployment assistance tax collection services under this chapter.” But, the statute specifically states that the tax collection service provider may only implement: (1) the provisions of this chapter conferring duties upon the tax collection service provider and (2) the provisions of law conferring duties upon the department which are specifically delegated to the tax collection service provider in the interagency agreement.” This language would appear to contradict the FDOR’s view that it can do and request whatever it wants.
Along this line, subsection two of the statute looks to bring in other statutory authority for application to the collection of reemployment assistance contributions. Of particular note is the subsection’s inclusion of section 213.34(1), (3), and (4), F.S. The cited statute is the “authority to audit” found in the chapter for general provisions for state revenue laws. It should be apparent that subsection (2) of this statute is clearly omitted in the inclusionary reference.
Section 213.34(2), F.S., states:
The department, or its duly authorized agents, may inspect such books and records necessary to ascertain a taxpayer’s compliance with the revenue laws of this state, provided that the department’s power to make an assessment or grant a refund has not terminated under s. 95.019(3).
So, the broad legislative grant to the FDOR to audit books and records has been specifically excluded from the application and incorporation in the chapter regarding reemployment assistance (i.e. RT). Does this make sense though?
A closer inspection shows that it does. Section 443.171, F.S., addresses records and reports. This statute states “each employing unit shall keep true and accurate work records, containing the information required by the Department of Economic Opportunity or its tax collection service provider.” The reference here is to “work” records and does not go broadly into “operations” or some other choice of wording that would expand records requirements beyond the chapter relating to reemployment assistance. It is logical to read the laws as providing authority only for the subject matter it relates to and not empowerment to go “fishing” into any other areas at the FDOR’s whim.
Nonetheless, the FDOR has been vaguely stating that it has the right to seek any (and all) records for a taxpayer selected for audit. The FDOR issues the vast information request and typically states that failure to provide the requested information will result in the taxpayer’s rate being increased to the maximum. The FDOR’s “penalty is an interesting one. I do not find any statutory authority for the FDOR to raise rates for any failure to provide records. Any penalty language referred to the failure to provide “reports required under this chapter”.
I provide this information so you can be prepared for any questions your client might have when they have contact with the FDOR regarding a RT audit notice. This also can help you if you are the POA that will handle the audit on your client’s behalf. It should be helpful to know what you can expect from the auditor’s initial request. We handle a number of RT audits for businesses in a vast number of industries. We provide a free initial consultation that can help taxpayers better understand what to expect from the RT audit process and what information needs to be provided to complete an accurate audit under Chapter 443, F.S.
About the author: Mr. Parker is a sales and use tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the firm's Tampa office. Mr. Parker's practice includes state tax audits and controversies involving sales and use tax and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Parker received his law degree and L.L.M. in Taxation from the University of Florida. If you have any questions, then you can read more about him his firm bio.