The new year (2025) is upon us. That means that the government is back in the office and has resumed work. This necessarily includes the Florida Department of Revenue (FDOR) As with many businesses, various government entities "slow down" toward the last two months of the year. This means the start of the new year brings increased activity to resume prior work and efforts to start up new matters. For the FDOR, this means heightened activity with criminal investigations, collections matters, and audits - especially sales and use tax.
With FOR collection activity, this will relate to businesses that owe the Department unpaid liabilities (tax, penalty, interest and/or fees) or have unfiled returns. While suffering from serious understaffing throughout the state, FDOR collectors will start contacting taxpayers with phone calls in addition to the standard system generated notices. Routinely, the collector who calls will simply identify themself and provide a phone number to call back without leaving any detail on the basis for calling. The return call will then reveal the identification for the need to make a payment and/or file a return (then make a payment if not included with the filed return). The need for a payment plan will result in receipt of form ZT20 Request for Financial Information to justify a payment plan and help determine what the FOR "thinks" the taxpayer can afford to pay for a down payment and monthly payments.
The above collection activity represents the majority of collector contacts to businesses and their representatives. However, January's return to the office also sees increased "enforcement activity" by the Department through immediate bank freezes come the first week - or day - back in the office in January. These bank freezes are critical to address immediately for a couple reasons. Naturally, a business that has lost access to its bank account will face immediate going concerns in not being able to pay vendors and employees. The business will need to quickly regain access to its bank account and funds therein. This relates to the other critical reason to move quickly on a bank freeze - FDOR delay.
With the aforementioned FDOR staffing shortages, this means limited staff - and time - to follow up and resolve the applicable bank freeze. The bank freeze takes little time to execute. The FDOR collector prepares the notice of freeze which is sent out to taxpayer banks of note along with other banks in an effort to identify other available assets/accounts to collect from. With recent years' January freezes, I have seen FDOR collectors take up to two weeks to follow up on an initial contact regarding intent and efforts to resolve the situation. Then when the FDOR collector does respond, I generally get an update on where the particular taxpayer’s position is "in line" of bank freezes. It appears the Department can freeze many bank accounts but is limited on how many accounts it can work to release at a time. This can result in the taxpayer getting "stacked" behind other businesses to try and resolve the situation. The FDOR collector is going to look for the last two federal returns, at least last six months' bank statements, and last two years' financial statements (assuming they exist) with taxpayer proposed payment plan terms. When the FDOR collector receives the information, then it reviews the information to make a decision on the proposed payment plan - generally the FOR counters seeking more of a down payment and/or larger monthly payments. The situation gets resolved with agreement on terms and an executed authorization to release which authorizes the bank to send the down payment directly to the Department - assuming the taxpayer can't otherwise get the down payment (or full amount due) paid to the Department in certified funds. Businesses then are subject to its bank's operations to ultimately release the frozen bank account. Many banks now maintain the account freeze until the cashier's check is prepared and send to the bank. While banks differ, this frequently takes at least a day or two more (some banks have taken close to a week to release the FDOR frozen account).
While also serious like collections activity, FDOR criminal investigators get back to work in Januarys. They can complete prior year investigations to submit to State Attorney's Offices (SAO). They can also begin many new investigations. These are "trickier" in that FDOR investigators generally work "behind the scenes" upon assignment of a case. This typically involves the investigator sending a subpoena to the taxpayer's bank for statement copies. The subpoena will most likely indicate the institution is not to divulge the existence of the subpoena. This means the business will not be aware of the activity. Only much later will the investigator reach out to the taxpayer to provide a business card and/or letter divulging the existence of the investigations with a request for records and/or a meeting to discuss the situation. Some investigators won't send a letter but will instead simply show up at the taxpayer's physical location looking to speak at that time about operations and available records. After doing this, the investigator then can request specific records - or subpoena records from a third party if sales systems are identified by the taxpayer or "spied" by the investigator while there in person. At this point, the business needs to realize time is most likely limited in trying to resolve the matter before the FDOR investigator gets their report approved for delivery to the SAO. That almost always results in charges being filed by the SAO if immediate action isn't taken to resolve the underlying issue/basis for the investigation into theft of state funds i.e. sales tax collected and not remitted. Most business owners/officers/managing members would benefit from avoiding criminal charges so quick reaction to learning of a criminal investigation is paramount to achieving an optimal outcome.
Finally, the new year results in audits. This most frequently involves and sales use tax notices of the intent to audit books and records. Many auditors looks to issue many audit notices from late January to about the third week of February. This is intentionally and strategically done. Audit notices set the period under audit. By waiting until after the December late filing deadline, the audit notice will set a three calendar year period for audit. This helps ease the review by being able to "sample" or rely on federal returns and financial statements which most businesses prepare for their calendar year operations.
While providing an "organized" way to approach audit information for review, the timing is difficult for businesses and tax professionals. Both deal with end and start of year obligations. Depending on the business size, this could mean audited financial statements. More applicable is the situation of "tax season" and getting out W-2s and 1099s for the prior year and getting ready to complete prior year federal income tax returns. Here in Florida, that is especially tough since recent hurricanes resulted in federal filing extensions but means that this year involves filing deadlines for both 2023 and 2024. Those obligations take up much time for businesses and professionals which means limited to no time to respond to the audit notice. This can create ongoing and very difficult times for the audited business.
While the audit notice should allow preparation time until March to April of the audit notice year (still in tax season though), the auditor will not likely be patient for longer extensions to provide information. if no - or little - information is provided, then the auditor is going to invoke statutory authority to estimate audit findings from "the best available information." This will be decided by the auditor and their supervisor with a great amount of discretion. The taxpayer can expect that the estimation decision will not be to the taxpayer's benefit.
As such, responding to the auditor's request for information is vital to avoid "starting" with estimated findings that greatly overestimate unreported/additional taxable Florida sales. With the increased pressure to provide information to the auditor, there is a huge caveat the business and professional needs to be aware of - providing incorrect and overstated information. Even with the disclaimer that the requested information being provided is incorrect, the auditor likely is going to simply "accept" numbers if they can indicate additional unreported taxable sales in any way. Most auditors don't even question higher numbers that might on their face appear to be incorrect. Auditors simply make findings and then switch the burden to the taxpayer to "prove" the alleged/assessed tax isn't due. This will have to be done in/through the protest process. Not unexpectedly, disproving incorrect information is a lengthy and time-consuming process - that ultimately ends up being more expensive in the end than it had to be.
While the start of the year carries a lot of necessary activities for businesses and tax professionals, it is important that both know the risks of FOR activity to best resolve those situations with as limited impact to the business as possible. Each type of FDOR activity - collections, criminal investigations, and tax audits - will involve its own applicable timeline and limitations on how to best resolve them. Regardless, each requires the earliest possible starting point to best resolve the business’s applicable situation.
We handle all types of FDOR activities. It would be wise to reach out to utilize our free initial consultation to at least determine what time is available to resolve the matter. We can provide information on how to move forward and help as needed should the business or tax professional not be able to immediately handle the situation with the FDOR.
About the author: Mr. Parker is a partner in the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the firm's Tampa office. Mr. Parker's practice concentrates on sales and use tax and includes criminal defense of sales tax cases and state tax audits/controversies proceeding from audit through administrative litigation involving sales and use tax and all other state taxes including reemployment tax, communication service tax, and cigarette & tobacco tax. Mr. Parker also handles matters involving the Department of Business and Personal Regulation and Office of Financial Regulation and the industries they oversee. Mr. Parker received his accounting degree, law degree, and L.L.M. in Taxation from the University of Florida. You can read more about Matthew in his firm bio.
About the law firm: At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.
ADDITIONAL RESOURCES
FLORIDA SALES TAX AUDIT HELP, published January 8, 2025, by James Sutton, CPA, Esq.
DON’T HIRE AN IRS ATTORNEY FOR SALES TAX PROBLEMS, published July 17, 2024, by James Sutton, CPA, esq.
FL DOR SALES TAX CRIMINAL INVESTIGATIONS – WHAT YOU NEED TO KNOW, published July 1, 2023, by Matthew Parker, Esq.
FL Department of Revenue Bank Freezes - A Summary from Start to Release, published February 15, 2024, by Matthew Parker, Esq.
FL Sales Tax Collections Actions - Notice of Warrant Filing and Ensuing Activity, published July 8, 2024, by Matthew Parker, Esq.
FL Sales Tax Audit - From Audit Notice to NOPA, published September 17, 2023, by Matthew Parker, Esq.
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