Six myths about tax compliance.

December 1, 2015 Lynn Larson

Hindsight can be 20/20 regarding Purchasing Card programs and tax compliance. Many organizations overlook tax or unknowingly place their trust in myths. Either way, a big crash at the end of a tax audit is likely. Tax veteran Greg Anderson, Application Design Resource LLP, wants to spare organizations such pain, so he shared common myths with me, based on his 20+ years of experience in this field.

Myths

Our P-Card program is too small to worry about.
The card program should never be swept aside. Even when a program starts small, it usually grows, becoming a bigger headache when tax audits end with poor results, such as assessments and penalties.

The tax department handles this.
This is often said by procurement or accounts payable (depending on who manages the card program), but nothing could be further from the truth if the tax department was never consulted. Unfortunately, most of the time, the card program management team does not have any relationship with the tax folks and tax compliance slips through the cracks.

Our bank/issuer sends us tax reports.
There is a kernel of truth here, but... Issuers typically provide reporting related to Level II data, but such reports are not relevant to tax auditors since the data represents tax paid versus tax that should have been paid.

The remaining three myths stem from management hopefulness or lack of awareness about actual purchasing activity by cardholders:

Merchants pass a tax amount on all of our transactions.
We only buy from local merchants.
Our cardholders only buy items for which merchants collect tax.

An organization’s situation is seldom this rosy, so just assume none of these things apply.

Organizations often accelerate P-Card usage without considering tax compliance, but the issue will catch up with a program.

Taking Action

Having an effective tax strategy begins with communication. Ensure you have clear answers to:

Who is responsible for our P-Card tax compliance?
What is our tax strategy for the P-Card program
What have tax audits revealed?
How can we improve?

See a previous blog post that summarizes key tax points and includes links to additional tax content. If you are seeking a more automated solution to tax management, Recharged Education can provide guidance; please submit a contact form.

“You can’t help but... with 20/20 hindsight, go back and say, ‘Look, had we done something different, we probably wouldn’t be facing what we are facing today.’”

— Norman Schwarzkopf

About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…

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What I learned from Shark Tank’s Barbara Corcoran.

November 18, 2015 Lynn Larson

Recently, I eagerly anticipated hearing Barbara Corcoran speak at a conference. I was not disappointed. I learned things from both her prepared message and responses to audience questions. What I did not expect, though, was the power of a woman who spoke from the stage for just a few minutes prior to Barbara emerging. Both women inspired me, even though, on the surface, they were complete opposites.

The “Other Speaker”

The woman who appeared before Barbara was originally from Sudan. She lives in the United States now and had been a recipient of a Habitat for Humanity home. The conference organizer wanted her to share a bit about her experience. She didn’t speak for a moment, as she appeared to take in the massive surroundings and gather her strength. Then she shared that, in Sudan, a woman was not allowed to stand and speak in front of a crowd. She was clearly moved, as were all of us in the audience. She also described how, to be eligible for a Habitat home, she had to increase her income first. She continues to improve herself and her situation, including taking English classes. Determination, resilience, achievement. She represented all of these traits.

Barbara Corcoran

Barbara was born and raised in New Jersey. Her credentials, also noted on her website, include “straight Ds in high school and college, and 20 jobs by the time she turned 23.” She overcame challenges to become the success she is today, but challenges do not end just because someone is successful. She observed the power of the insult as a motivator and encouraged the audience to be great at failure. Great salespeople do not stay down long was part of her message. Indeed, we are all salespeople in some respect. Her advice also included asking good questions (I wonder if she agrees with the value of asking why). I thought she was refreshingly candid and down to earth. Determination, resilience, achievement. She represented all of these traits.

Conclusions

These women are not so opposite after all. Setting goals, facing obstacles, finding a way to succeed. It does not matter that their goals are/were different. I was reminded of the importance of speaking up, which is quite different than simply being loud, and learning from missteps along the way. Their respective stories represent two extremes and most of us are somewhere in between, but they made me consider what is possible. Everyone has an opportunity to be better, regardless of their past. I felt renewed, professionally and personally.

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Finding cardholders when needed.

November 11, 2015 Lynn Larson

Cardholder contact information is a simple, but often forgotten, topic. Sure, you capture the information each time an employee obtains a card, but have you reviewed it since then? Does your issuer have everything they need? It plays a role in your fraud defense, as explained below. If the information is incomplete, inconsistent, and/or outdated, you may run into issues.

Make It Complete

Increasingly, issuers are seeking cardholders’ mobile numbers, so they can more quickly validate suspicious transactions. Text messages are a good option and far more effective than trying to reach someone on their desk phone. As a program manager, it can be tempting to direct the issuer to contact you first in these cases, but this only slows the process down. If mobile numbers are desirable, ask your cardholders to provide and follow up to confirm completion.

In addition, ensure your cardholders know how the issuer will contact them and what the communication looks or sounds like, so they can discern legitimate communications from fraudulent ones. (This tip is part of my risk analysis template, available for purchase.)

Make It Consistent

The longer your organization has had a card program, the more likely it is that cardholder contact information is not uniform; for example, variations in cardholder addresses. Consistency supports memory retention, which can matter in cases of transaction verification, as well as during some payment processes.

Cardholders who do not respond to issuer communications about suspicious transactions are not upholding their full responsibilities related to fraud detection.

Confirm It is Current

Do you require cardholders to review their contact information that is on file with the issuer? Add this to my list of 12 housekeeping tasks—now 13—to complete annually. While you are at it, confirm that the issuer’s records are accurate. You might find discrepancies ranging from minor (e.g., the wrong desk/office phone number for someone) to significant (e.g., issuer shows an open card account that you thought was closed).

While cardholder contact information is a small part of Commercial Card program management, keeping it complete, consistent and current can pay off in significant ways. Your issuer will thank you!