Kansas State Tax Audit Response — IDR and Position Statement

KANSAS DEPARTMENT OF REVENUE — AUDIT RESPONSE PACKAGE

TABLE OF CONTENTS

1. Cover Letter
2. Power of Attorney and Representation
3. Audit Identification
4. Reservation of Rights
5. Response to Information Document Request (IDR)
6. Position Statement on Proposed Adjustments
7. Records Retention and Production Log
8. Penalty Abatement Request
9. Closing Conference Request
10. Verification and Signature
11. Kansas Practice Notes
12. Sources and References

1. COVER LETTER

[DATE]

VIA EMAIL AND CERTIFIED MAIL — RETURN RECEIPT REQUESTED

[KDOR FIELD AUDITOR NAME]

Audit Services Bureau
Kansas Department of Revenue
[AUDITOR ADDRESS]
Email: [AUDITOR EMAIL]

Re: Response to Information Document Request and Position Statement
Taxpayer: [TAXPAYER NAME]
Kansas Tax Account / FEIN / SSN: [ID NUMBER]
Audit Number: [AUDIT NO.]
Tax Type(s): [Individual Income / Corporate Income / Sales-Use / Withholding / Privilege]
Audit Periods: [FROM __/__/____ THROUGH __/__/____]
IDR Number: [IDR NO.]
Original Response Due Date: [__/__/____]
Extended Response Due Date (if any): [__/__/____]

Dear [AUDITOR NAME]:

Enclosed please find Taxpayer's response to your Information Document Request dated [__/__/____], together with a Position Statement addressing the proposed adjustments identified in your [___] workpapers. Taxpayer is represented in this audit by the undersigned and requests that all further correspondence be directed to counsel at the address below.

This response is submitted without prejudice to, and with full reservation of, all rights and defenses available under Kansas law, including those enumerated in the Kansas Taxpayer Bill of Rights and Privileges, K.S.A. 79-3268.

Respectfully,

[________________________________]

[ATTORNEY / CPA NAME]

2. POWER OF ATTORNEY AND REPRESENTATION

2.1. Authorization. Taxpayer has executed Kansas Department of Revenue Form DO-10 (Power of Attorney) authorizing [REPRESENTATIVE NAME] to represent Taxpayer in this audit and any subsequent administrative or judicial proceeding. A copy of the executed DO-10 is enclosed as Exhibit A.

2.2. Right to Representation. Pursuant to K.S.A. 79-3268 and KDOR field-audit policy, Taxpayer exercises the right to be represented by counsel and an accountant during all phases of this audit. Auditors are requested to direct all communications, document requests, and notices to the representative of record.

2.3. Recording. ☐ Taxpayer requests, pursuant to K.S.A. 79-3226(b) (applied by analogy), that any audit interview or closing conference be recorded at Taxpayer's expense. Taxpayer will provide the recording equipment.

3. AUDIT IDENTIFICATION

4. RESERVATION OF RIGHTS

4.1. Taxpayer expressly reserves all rights, defenses, and privileges available under federal and Kansas law, including but not limited to:

• The right to challenge any proposed assessment through informal conference under K.S.A. 79-3226 within 60 days of any Notice of Additional Tax.
• The right to appeal an adverse final determination to the Kansas Board of Tax Appeals under K.S.A. 79-1609 within 30 days.
• The statute-of-limitations defense under K.S.A. 79-3230.
• The attorney-client privilege, the work-product doctrine, and the federally-authorized tax practitioner privilege under IRC § 7525 and Kansas common law.
• The right to assert reasonable cause for abatement of penalties under K.S.A. 79-3228.
• The right to refuse to extend the statute of limitations and to limit the scope of any Form 872 waiver to specific issues.
• All rights enumerated in K.S.A. 79-3268.

4.2. Production of any document in response to the IDR is not, and shall not be construed as, a waiver of any privilege or defense. Privileged or work-product materials are being withheld and will be logged on a privilege log if requested.

5. RESPONSE TO INFORMATION DOCUMENT REQUEST (IDR)

The following responses correspond to the numbered items in KDOR's IDR dated [__/__/____].

5.1. Format of production. Documents are produced in [native Excel / searchable PDF / paper] form via secure file transfer at [KDOR portal / encrypted email]. Bates numbering is [PREFIX]-00001 through [PREFIX]-[___].

5.2. Privileged materials. A privilege log is enclosed as Exhibit C identifying each document withheld on the basis of attorney-client privilege, work product, or IRC § 7525 federally-authorized tax practitioner privilege.

5.3. Items not in Taxpayer's possession. Taxpayer does not have, has never had, or no longer has the following requested items, and after reasonable inquiry cannot produce them: [LIST]. Taxpayer's record-retention practices and the statutory retention periods discussed in Section 7 govern availability.

5.4. Objections. Taxpayer objects to the following IDR items on the grounds noted: [ITEM NO.] — [OBJECTION: overbroad / outside audit period / not in possession / privileged].

6. POSITION STATEMENT ON PROPOSED ADJUSTMENTS

6.1. Adjustment No. 1 — [TITLE — e.g., Disallowance of Bonus Depreciation Subtraction]

KDOR Position. [Summarize KDOR's adjustment and rationale, citing workpaper page.]

Taxpayer Position. Taxpayer respectfully disagrees. [Summarize the law, apply to the facts, cite K.S.A. provisions, K.A.R. regulations, KDOR guidance, and Kansas case law / BOTA precedent.]

Authorities. K.S.A. 79-32,[___]; K.A.R. 92-12-[___]; In re Tax Appeal of [Cite].

Documents. [List exhibits.]

6.2. Adjustment No. 2 — [TITLE]

[Same structure.]

6.3. Adjustment No. 3 — [TITLE — e.g., Sales-Tax Exemption Certificate Gaps]

KDOR Position. [Summarize.]

Taxpayer Position. Pursuant to K.S.A. 79-3651, a retailer that accepts an exemption certificate in good faith is relieved of the obligation to collect tax. To the extent specific certificates are missing, Taxpayer [has obtained substitute certificates / has documented the exempt status via alternative evidence / requests the 120-day cure period under SST procedures]. Substitute certificates are produced as Exhibit D.

6.4. Statute-of-Limitations Issues

The audit period extends from [___] through [___]. Returns for tax years [___] were filed on [__/__/____], which renders any assessment for those years untimely under the three-year limitation in K.S.A. 79-3230(a) absent fraud, a 25%-or-more omission of income, or a written waiver. No waiver has been executed for years [___]. KDOR is therefore time-barred from assessing additional tax for those periods.

6.5. Constitutional and Federal Pre-emption Defenses

To the extent applicable, Taxpayer reserves and asserts (i) Commerce Clause and Wayfair nexus defenses (for non-resident or remote-seller issues); (ii) Due Process minimum-contacts defenses; (iii) federal pre-emption defenses (e.g., 4 U.S.C. § 114 for retirement income; P.L. 86-272 for solicitation-only sellers); and (iv) Internal Consistency Test challenges to apportionment.

7. RECORDS RETENTION AND PRODUCTION LOG

7.1. Retention period. Taxpayer maintains records for at least the periods required by Kansas law:

7.2. Production log. A bates-numbered production log is enclosed as Exhibit E identifying every document produced, the date produced, the format, and the IDR item to which it is responsive.

8. PENALTY ABATEMENT REQUEST

8.1. Taxpayer requests, in advance of any proposed assessment, that all penalties be abated under K.S.A. 79-3228 (income tax) and K.S.A. 79-3615 (sales/use) for reasonable cause and the absence of willful neglect.

8.2. Grounds for abatement.

• Taxpayer relied in good faith on the written advice of [NAME OF ADVISOR / CPA / LAW FIRM], a Kansas-licensed [attorney / CPA], as documented in the engagement letter and memos at Exhibit F.
• Taxpayer reasonably interpreted [STATUTE / REGULATION] consistent with KDOR's published guidance at [CITATION], and any difference of opinion was a good-faith dispute over a question of first impression.
• Taxpayer maintained complete books and records, timely filed all returns, and has no history of prior delinquency.
• Any underpayment was due to [reasonable cause — e.g., system conversion, natural disaster, illness, federal partnership audit timing], not willful neglect.

8.3. Pursuant to K.S.A. 79-3268(d), interest must be waived to the extent KDOR's own delay caused or extended any underpayment.

9. CLOSING CONFERENCE REQUEST

9.1. Taxpayer requests a closing conference under KDOR field-audit procedure prior to issuance of any Notice of Additional Tax. The conference may be held: ☐ in person at [location]; ☐ by telephone; ☐ by video.

9.2. Taxpayer requests the auditor's complete workpapers, including any computational schedules, sampling methodology, and supervisor review notes, no fewer than fourteen (14) days before the closing conference, to enable meaningful response.

9.3. If agreement is not reached, Taxpayer will exercise its right under K.S.A. 79-3226 to request an informal conference within 60 days of any Notice of Additional Tax, and thereafter to appeal to BOTA under K.S.A. 79-1609 if necessary.

10. VERIFICATION AND SIGNATURE

I declare under penalty of perjury under the laws of the State of Kansas that the foregoing audit response and the accompanying production are true, correct, and complete to the best of my knowledge, information, and belief.

Date: [__/__/____]

[________________________________]

[TAXPAYER / OFFICER NAME]

Title: [TITLE]

For the Representative:

[________________________________]

[ATTORNEY / CPA NAME]

KS Bar No. / CPA No.: [NUMBER]

[FIRM]

[ADDRESS] | Tel: [NUMBER] | Email: [EMAIL]

11. KANSAS PRACTICE NOTES

• Audit timeline. KDOR's Field Audit brochure expects taxpayers to provide records within 30 days of an auditor's request, with extensions available on request. Document every extension in writing and confirm by email.
• Statute of limitations. Three (3) years from the later of the return's due date or filing date. K.S.A. 79-3230(a). Six (6) years for 25%+ omissions of income. Indefinite for fraud or unfiled returns. Federal RAR adjustments must be reported to KDOR within 180 days; failure to do so extends the Kansas SOL indefinitely as to those items. K.S.A. 79-3230(c).
• Form 872 waivers. Limit the scope and length of any waiver. Insist on an issue-specific waiver where possible. Never sign an open-ended waiver.
• Sales-tax records. K.S.A. 79-3609(c) imposes a three-year retention requirement keyed to the later of the calendar or fiscal year end. Retailers should retain exemption certificates, sales journals, register tapes/POS data, and resale documentation.
• Federally-authorized practitioner privilege. Kansas recognizes IRC § 7525 in non-criminal tax matters; do not assume privilege automatically — assert it on the privilege log and decline production of the privileged communications.
• Auditor performance standards. K.S.A. 79-3268(c) prohibits KDOR from evaluating auditors on a quota of total assessments issued. If you suspect improper pressure, document and raise it with the audit manager and ultimately with the Office of Administrative Appeals.
• Quote-protective transmittal. Always transmit responses by certified mail or via the KDOR secure portal, and maintain a contemporaneous production log. Avoid producing original documents — produce copies and retain originals.
• No surprise interviews. Decline on-the-spot interviews; insist that all questions be reduced to a written IDR with reasonable response time.
• Federal-state coordination. If a parallel IRS examination exists, coordinate strategy carefully — Kansas piggybacks federal adjustments through its conformity provisions and the K.S.A. 79-3230(c) reporting obligation.

12. SOURCES AND REFERENCES

• K.S.A. 79-3233 (Powers of Secretary; books and records) — https://ksrevisor.gov/statutes/chapters/ch79/079_032_0033.html
• K.S.A. 79-3268 (Taxpayer Bill of Rights and Privileges) — https://www.kslegislature.gov/li/b2025_26/statute/079_000_0000_chapter/079_032_0000_article/079_032_0068_section/079_032_0068_k/
• K.S.A. 79-3226 (Notice of additional tax; informal conference) — https://ksrevisor.gov/statutes/chapters/ch79/079_032_0026.html
• K.S.A. 79-3228 (Penalties; reasonable cause) — https://ksrevisor.gov/statutes/chapters/ch79/079_032_0028.html
• K.S.A. 79-3230 (Statute of limitations on assessment) — https://ksrevisor.gov/statutes/chapters/ch79/079_032_0030.html
• K.S.A. 79-3609 (Sales-tax records; assessment and refund SOLs) — https://ksrevisor.gov/statutes/chapters/ch79/079_036_0009.html
• KDOR Field Audit of Kansas Tax Returns brochure — https://www.ksrevenue.gov/pdf/audit.pdf
• KDOR Appeals Page — https://www.ksrevenue.gov/appeals.html
• KDOR Form DO-10 (Power of Attorney) — https://www.ksrevenue.gov/forms-pertaxprof.html
• IRC § 7525 (federally-authorized tax practitioner privilege) — 26 U.S.C. § 7525

Disclaimer: This template is provided for informational purposes only and does not constitute legal or tax advice. Audit responses materially affect the taxpayer's legal position and may waive defenses if not properly preserved. Have this template reviewed by a Kansas-licensed attorney or CPA before submission.