{"id":14767,"date":"2025-06-30T18:38:09","date_gmt":"2025-06-30T18:38:09","guid":{"rendered":"https:\/\/taxops.com\/?p=14767"},"modified":"2025-06-30T18:51:27","modified_gmt":"2025-06-30T18:51:27","slug":"too-good-to-be-true-the-hidden-risks-of-pursuing-sketchy-rd-credit-claims","status":"publish","type":"post","link":"https:\/\/taxops.com\/too-good-to-be-true-the-hidden-risks-of-pursuing-sketchy-rd-credit-claims\/","title":{"rendered":"Too Good to Be True? The Hidden Risks of Pursuing Sketchy R&#038;D Credit Claims"},"content":{"rendered":"\n<div style=\"height:41px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/too-good-to-be-true-1-1024x576.png\" alt=\"\" class=\"wp-image-14775 lazyload\" data-srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/too-good-to-be-true-1-980x551.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/too-good-to-be-true-1-480x270.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><noscript><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/too-good-to-be-true-1-1024x576.png\" alt=\"\" class=\"wp-image-14775 lazyload\" srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/too-good-to-be-true-1-980x551.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/too-good-to-be-true-1-480x270.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><\/noscript><\/figure>\n\n\n\n<div style=\"height:41px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><em>If it sounds too good to be true, it probably is&#8211;especially when it comes to R&amp;D tax credits. Before you chase big refund estimates, make sure you&#8217;re not stepping into a compliance minefield.<\/em><\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">By <a href=\"https:\/\/taxops.com\/mark-dunning\/\" target=\"_blank\" rel=\"noopener\" title=\"Mark Dunning\">Mark Dunning<\/a> and <a href=\"https:\/\/taxops.com\/jamie-overberg\/\">Jamie Overberg<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There\u2019s a trend in the marketplace right now to inflate R&amp;D tax credit claims pushed by aggressive vendors\u2014including some large, reputable firms. Taking risks like these have serious, real-world consequences, especially for unsuspecting companies.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Taxpayers can benefit from some practical advice to help select the right R&amp;D credit vendor, one who will ensure compliance and help you avoid costly IRS audits.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How Vendors Inflate Claims<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">With IRS staffing historically low and audit rates perceived to be declining, some vendors have seized the opportunity to push exaggerated R&amp;D claims. These firms\u2014often including well-known national or Big Four accounting firms\u2014entice businesses with promises of doubling or even tripling their credits.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But as <a href=\"https:\/\/taxops.com\/mark-dunning\/\">Mark Dunning<\/a>, partner at <a href=\"https:\/\/taxops.com\/tax-minimization\/\">TaxOps Minimization<\/a>, warned, \u201cThey think the risk is going down so, they don\u2019t feel they need to do a correct job on their tax returns.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To justify larger credits, some vendors include roles and expenses that clearly fall outside the scope of qualified R&amp;D activities. These may include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Sales and marketing personnel&nbsp; <\/strong>\u2013 Despite the tax code explicitly excluding these functions, some vendors still claim 100% of their wages under the guise of \u201ctechnical sales\u201d or \u201cmarket research.\u201d<\/li>\n\n\n\n<li><strong>Accounting and administrative staff&nbsp; <\/strong>\u2013 These roles may support R&amp;D teams but their work is typically classified as general and administrative, which is not eligible for the credit.<\/li>\n\n\n\n<li><strong>Process engineers performing routine operations &nbsp;<\/strong>\u2013 While process development can qualify, routine maintenance or production support does not. Yet, vendors often overstate the qualifying nature of these activities.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">While certain positions\u2014like testers or solutions engineers\u2014may qualify for partial inclusion if they directly support R&amp;D efforts, many vendors apply a blanket approach, claiming 100% of wages or time without proper documentation or analysis. This not only inflates the credit but also exposes the company to significant audit risk.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cThat\u2019s where the aggressive positions come in and start to make us cringe. It\u2019s not just about stretching the rules\u2014it\u2019s about ignoring them entirely in some cases,\u201d Mark said.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The problem is compounded when vendors fail to differentiate between&nbsp;qualified research activities&nbsp;and&nbsp;supporting or managerial functions, leading to inflated claims that won\u2019t hold up under IRS scrutiny.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This practice may temporarily boost a company\u2019s credit, but it undermines the integrity of the claim and can lead to costly consequences when the IRS comes knocking. This practice may temporarily boost a company\u2019s credit, but it undermines the integrity of the claim and can lead to costly consequences when the IRS comes knocking.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><em>This practice may temporarily boost a company\u2019s credit, but it undermines the integrity of the claim and can lead to costly consequences when the IRS comes knocking.<\/em><\/p>\n<\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The Illusion of Safety with Big Firms<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Many businesses assume that working with a large, reputable firm\u2014especially one of the Big Four\u2014automatically ensures compliance and insulates them from risk. This belief is not only misleading but potentially dangerous.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Some companies are lulled into a false sense of security simply because of the brand name attached to their tax filings.<br>\u201cThey feel that they can get away with it because they\u2019re a \u201cbig\u201d &nbsp;international firm,\u201d Mark said.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But the reality is that&nbsp;vendor size has nothing to do with immunity when credit claims exceed what is allowable under the law. The size of a firm also has no bearing on whether their practices are compliant.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Some firms use their reputation as a shield while pushing the boundaries of what qualifies for the R&amp;D credit. They may include unqualified roles, inflated time allocations, or the application of overly broad interpretations of the tax code\u2014all in the name of delivering a bigger credit \u2013 while you pay their hourly fees for defense (for many years!) when the credit claim raises red flags.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">An aggressive approach can backfire. If the IRS suspects that a company is making fraudulent or overly aggressive claims, it can&nbsp;reopen tax years well beyond the standard three-year statute of limitations\u2014sometimes going back seven years or more. The consequences can be severe: expanded audits, penalties, reputational damage, and a strained relationship with the IRS that can affect future filings.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Moreover, relying on a firm\u2019s size as a proxy for quality can lead to complacency. Businesses may stop asking critical questions or reviewing the details of their claims, assuming that the experts have it covered.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Mark emphasized,&nbsp;\u201cEvery company is ultimately responsible for what\u2019s on its tax return, regardless of who prepared it.\u201d<br>The prestige of a vendor should never replace due diligence. Trust must be earned through transparency, not assumed based on branding.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><em>Trust must be earned through transparency, not assumed based on branding.<\/em><\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">As <a href=\"https:\/\/taxops.com\/jamie-overberg\/\">Jamie Overberg<\/a>, partner at <a href=\"https:\/\/taxops.com\/tax-minimization\/\">TaxOps Minimization<\/a>, pointed out, \u201cJust because you can get away with something doesn\u2019t mean you should.\u201d<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The Fallout: Real-World Consequences<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Mark and Jamie share a couple real-world examples that illustrate the dangers of trusting aggressive R&amp;D credit vendors\u2014especially when decisions are driven by the promise of a bigger refund rather than sound tax strategy.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<h4 class=\"wp-block-heading\"><strong>Japanese Automaker<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">In one case, a Japanese automotive manufacturer had a well-documented, IRS-approved methodology for calculating its R&amp;D credit, including a pre-filing agreement that had passed multiple audits without issue.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, a new VP of Tax was swayed by a Big Four firm\u2019s pitch to double the credit\u2014despite TaxOps already having accounted for every engineer and qualifying activity at the company.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The result?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A multi-year IRS audit that has become a \u201chuge mess,\u201d according to the automaker. Once confident in its compliance, the automaker is now entangled in a prolonged examination and has distanced itself from its former advisors out of embarrassment.<\/p>\n<\/blockquote>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<h4 class=\"wp-block-heading\"><strong>Food Services Company<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">In a separate case, a food services company initially declined to pursue the R&amp;D credit due to the limited scope of qualifying activities in their operations. Years later, they engaged a Big Four firm that aggressively claimed a credit on their behalf.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When TaxOps recently reconnected with the company\u2019s VP of Tax, the executive admitted\u2014albeit with a knowing eye-roll\u2014that the credit was likely overstated. His attitude suggested a belief that the Big Four\u2019s reputation would shield them from IRS scrutiny.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But knowingly filing an inflated claim, even with a Big Four firm, doesn\u2019t absolve a company of legal responsibility. The risk of audit and reputational damage remains very real for this VP of Tax and the food services company.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These stories underscore a critical lesson:&nbsp;just because a vendor can promise a bigger credit doesn\u2019t mean it\u2019s legitimate or safe for your business. The short-term gain of a larger refund can quickly be overshadowed by the long-term cost of an audit, penalties, and damaged credibility.<\/p>\n<\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>How to Protect Your Business<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Mark and Jamie offer actionable advice for companies navigating the complex world of R&amp;D tax credits. Their guidance is especially valuable for CFOs, tax directors, and business owners who may be relying on third-party vendors but still want to ensure their filings are defensible and compliant.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Educate yourself<\/strong>: Even if you outsource R&amp;D credit work, tax managers and preparers should understand the basics of Section 41 and question anything that seems off.<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Read more: <a href=\"https:\/\/taxops.com\/wp-content\/uploads\/2023\/03\/Pay-less-Invest-more.TaxOps-Minimization.pdf\">Pay Less, Invest More<\/a><\/p>\n<\/blockquote>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A<strong>sk the right questions<\/strong>: If a vendor promises a large credit, ask how they plan to get there. If the explanation sounds like a \u201cslick used car salesman,\u201d it probably is.<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Read more: <a href=\"https:\/\/taxops.com\/rd-credits-big-box-myths-and-cutting-edge-of-quick-and-easy\/\">R&amp;D Credits: Big Box Myths and Cutting Edge of \u201cQuick and Easy\u201d<\/a><\/p>\n<\/blockquote>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Know your threshold<\/strong>: For small companies, having six full-time equivalent engineers typically justifies pursuing the credit. Anything less may not be worth the risk or cost.<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Read more: <a href=\"https:\/\/taxops.com\/a-guide-for-pe-firms-hidden-rd-credit-value-in-6engineers\/\">A Guide for PE Firms: Hidden R&amp;D Tax Credit Value in #6engineers<\/a><\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">The R&amp;D tax credit is a powerful incentive\u2014but only when used responsibly. As the IRS adjusts their audit processes and enforcement capabilities, businesses must be vigilant about who they trust to prepare their claims. As Mark put it, \u201cWe can make up a whole bunch of stuff too\u2014but that\u2019s not what the law says, and that\u2019s not legal.\u201d<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Eligible for R&amp;D Credits?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Any company that develops new or improved products, processes, or software\u2014in some cases, whether profitable or not\u2014may qualify for these lucrative credits.&nbsp;Wondering if you are eligible to take advantage of lucrative research credits that could cut your federal and state tax liability?&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Find out here! <a href=\"https:\/\/taxops.com\/eligible-for-lucrative-rd-credits-2\/\">Eligible for Lucrative R&amp;D Credits?<\/a><\/p>\n<\/blockquote>\n\n\n\n<div style=\"height:64px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Disclaimer: This content is for educational purposes only and is not intended, nor should it be relied upon, as legal, tax, accounting or investment advice. You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.&nbsp;<\/em><\/p>\n\n\n\n<div style=\"height:57px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/taxops.com\/contact\/\">Talk to a Business Tax Advocate<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Read more<\/h2>\n\n\n<ul class=\"wp-block-latest-posts__list wp-block-latest-posts\"><li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/auditor-independence-in-the-age-of-private-equity\/\">Auditor Independence in the Age of Private Equity: What CFOs Need to Know<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/r-d-credits-for-software-companies\/\">R&amp;D Credits for Software Companies: Scrum Teams, Qualifiers, and Section 174 After OBBBA<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/section-174-decoupling-what-tax-pros-need-to-know-state-by-state\/\">Section 174 Decoupling: What Tax Pros Need To Know State By State<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/sean-espy-new-partner\/\">TaxOps Welcomes Sean Espy as Partner, Tax Minimization<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/state-nexus-demystified-navigating-tax-compliance-after-wayfair-episode-1-2\/\">Your Tax Footprint Is Probably Bigger Than You Think: What Finance Leaders Need to Know About State Nexus<\/a><\/li>\n<\/ul>","protected":false},"excerpt":{"rendered":"<p>If it sounds too good to be true, it probably is&#8211;especially when it comes to R&amp;D tax credits. Before you chase big refund estimates, make sure you&#8217;re not stepping into a compliance minefield. By Mark Dunning and Jamie Overberg There\u2019s a trend in the marketplace right now to inflate R&amp;D tax credit claims pushed by [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":14775,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"<!-- wp:spacer {\"height\":\"41px\"} -->\n<div style=\"height:41px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:image {\"id\":14221,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/01\/2025-Colorado-State-and-Local-Tax-Legislation-1024x576.png\" alt=\"\" class=\"wp-image-14221\"\/><\/figure>\n<!-- \/wp:image -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><!-- wp:paragraph {\"align\":\"center\"} -->\n<p class=\"has-text-align-center\"><em>Judy Vorndran, lead partner of state and local tax at TaxOps, testified before the Colorado Senate Finance Committee on January 28, 2025. She addressed SB25-018 and SB25-046, proposed legislation that would create a searchable database and enhance audit confidentiality. Below is a summary of her remarks<\/em>.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph {\"align\":\"center\"} -->\n<p class=\"has-text-align-center\"><em>Following testimony and discussion, the Finance Committee unanimously passed both bills. SB25-018 now moves to the Committee on Appropriations while SB25-046, as amended, has been referred to the full Senate and placed on the Senate consent calendar.<\/em> <\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph {\"align\":\"center\"} -->\n<p class=\"has-text-align-center\"><em>\"It was an amazing experience to look in all of their faces and explain why these laws make Colorado more competitive and are good for both government and taxpayers<\/em>,\"<em>  ~ Judy Vorndran <\/em><\/p>\n<!-- \/wp:paragraph --><\/blockquote>\n<!-- \/wp:quote -->\n\n<!-- wp:group {\"layout\":{\"type\":\"constrained\"}} -->\n<div class=\"wp-block-group\"><!-- wp:spacer {\"height\":\"34px\"} -->\n<div style=\"height:34px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:heading {\"textAlign\":\"center\"} -->\n<h2 class=\"wp-block-heading has-text-align-center\">Testimony on SB25-018, Online Search of Sales and Use Tax, and SB25-046, Local Government Tax Audit Confidentiality Standards<\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:spacer {\"height\":\"42px\"} -->\n<div style=\"height:42px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer --><\/div>\n<!-- \/wp:group -->\n\n<!-- wp:paragraph -->\n<p>Good afternoon, members of the <a href=\"https:\/\/leg.colorado.gov\/committees\/finance\/2024-regular-session\" target=\"_blank\" rel=\"noopener\" title=\"Senate Finance Committee\">Senate Finance Committee<\/a>. My name is <a href=\"https:\/\/taxops.com\/judith-vorndran\/\" target=\"_blank\" rel=\"noopener\" title=\"Judy Vorndran\">Judy Vorndran<\/a>. I am a partner in the tax specialty firm TaxOps and a member of the &nbsp;Sales and Use Tax Simplification Task Force.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>I am here to testify in support of two bills, SB25-018 and SB25-046. A summary of my statement follows.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:spacer {\"height\":\"43px\"} -->\n<div style=\"height:43px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3 class=\"wp-block-heading\">SB25-018, Online Search of Sales and Use Tax<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>SB25-018 aims to create a searchable database for sales and use tax licenses and exemption certificates. This bill is crucial for improving transparency and compliance in our tax system.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3 class=\"wp-block-heading\">Key Points<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:list -->\n<ul class=\"wp-block-list\"><!-- wp:list-item -->\n<li><strong>Importance of a Searchable Database:<\/strong><\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li>SB25-018 proposes the creation of a database at the state and department of revenue level, allowing taxpayers to look up licenses and entities.<\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li><strong>Benefits for Taxpayers:<\/strong><ol><li>Having access to a searchable database would be a significant advantage for taxpayers. It would help them ensure that vendors are properly licensed and collecting the correct tax amounts.<\/li><\/ol><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>This measure would also align Colorado with other states, such as Texas, which already have similar databases in place. These databases have proven to be extremely helpful for taxpayers in those states.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li><strong>Improved Compliance:<\/strong><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>The searchable database would facilitate better compliance with tax laws. Taxpayers would be able to verify the status of vendors and themselves, reducing the risk of errors and ensuring accurate tax collection.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item --><\/ul>\n<!-- \/wp:list -->\n\n<!-- wp:paragraph -->\n<p>SB25-018 is a vital step towards enhancing transparency and compliance in Colorado's tax system. I urge the Committee to support this bill and help create a more efficient and taxpayer-friendly environment.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:spacer {\"height\":\"46px\"} -->\n<div style=\"height:46px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3 class=\"wp-block-heading\">SB25-046, Local Government Tax Audit Confidentiality Standards<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>SB25-046 addresses the confidentiality standards for local government sales or use tax audits. This bill would both protect taxpayer information and ensure fairer audit practices.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3 class=\"wp-block-heading\">Key Points<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>Confidentiality Concerns:<ol><li>SB25-046 aims to establish uniform confidentiality standards for local government tax audits. This is important because third-party auditors often conduct these audits, and there are concerns about how taxpayer information is handled and shared.<\/li><\/ol><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>Currently, third-party auditors are not always licensed professionals, and there is no regulation ensuring their confidentiality practices. This raises significant concerns about the protection of sensitive taxpayer information.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li>Issues with Third-Party Auditors:<ol><li>Many home-rule cities do not have captive auditors and rely on third-party auditors who may conduct audits on behalf of multiple jurisdictions. This can lead to inefficiencies and increased taxpayer burdens.<\/li><\/ol><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>There are instances where third-party auditors may target large taxpayers, leading to multiple audits across different cities. This practice is also burdensome and raises concerns about the confidentiality of taxpayer information.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li>Need for Regulation:<ol><li>There is a need for stricter regulation and oversight of third-party auditors to ensure they adhere to uniform confidentiality standards. This includes establishing ethical and fiduciary duties similar to those required of licensed professionals.<\/li><\/ol><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>The bill also highlights the importance of transparency in the contracts between cities and third-party auditors. These contracts should be subject to public scrutiny to ensure accountability.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list -->\n\n<!-- wp:paragraph -->\n<p>SB25-046 is essential for protecting taxpayer information and ensuring fair audit practices. I urge the Finance Committee to support this bill and help create a more transparent and accountable audit process. <\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>I would be happy to answer related questions you may have, and I thank you for the opportunity to weigh in on these important pieces of legislation.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:spacer {\"height\":\"57px\"} -->\n<div style=\"height:57px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:buttons {\"layout\":{\"type\":\"flex\",\"justifyContent\":\"center\"}} -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/taxops.com\/contact\/\">Talk to a Business Tax Advocate<\/a><\/div>\n<!-- \/wp:button --><\/div>\n<!-- \/wp:buttons -->\n\n<!-- wp:spacer {\"height\":\"53px\"} -->\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n<!-- \/wp:separator -->\n\n<!-- wp:heading -->\n<h2 class=\"wp-block-heading\">Read more<\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:latest-posts \/-->","_et_gb_content_width":"","spt_transcript":"","footnotes":""},"categories":[228,382,78,226],"tags":[252,1145,284,12,1144,1158,126,26,265,1135,492,1134,18,19,316,1136,30,810,101,799,605,262,79,267,620,80,712,1138,1137,74],"class_list":["post-14767","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-federal-tax","category-main-tax-min","category-tax-savings","category-tax-news","tag-accountant","tag-advocate","tag-cfo","tag-colorado","tag-colorado-society-of-cpa","tag-continuous-education","tag-cpa","tag-cpe","tag-finance-professional","tag-iaas","tag-leadership","tag-saas","tag-sales-and-use-tax","tag-sales-tax","tag-salt","tag-software-providers","tag-state-and-local-tax","tag-state-income-tax","tag-state-tax","tag-tax-advisor","tag-tax-automation","tag-tax-planning","tag-tax-preparer","tag-tax-professional","tag-tax-professionals","tag-tax-provider","tag-tax-school","tag-tax-tools","tag-tax-vendors","tag-taxops"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/too-good-to-be-true-1.png","_links":{"self":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/14767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/comments?post=14767"}],"version-history":[{"count":7,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/14767\/revisions"}],"predecessor-version":[{"id":14781,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/14767\/revisions\/14781"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media\/14775"}],"wp:attachment":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media?parent=14767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/categories?post=14767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/tags?post=14767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}