Wisconsin DOR Audit Response — IDR Responses, Position Statements, and Records Compliance

WISCONSIN DEPARTMENT OF REVENUE AUDIT RESPONSE PACKAGE

TABLE OF CONTENTS

1. Engagement and Power of Attorney (Form A-222)
2. Initial Response to Audit Notice
3. Information Document Request (IDR) Response
4. Position Statement / Audit Memorandum
5. Response to Notice of Proposed Audit Report
6. Penalty Defense and Reasonable-Cause Statement
7. Records Retention and Production Compliance
8. Wisconsin Practice Notes
9. Sources and References

1. ENGAGEMENT AND POWER OF ATTORNEY (FORM A-222)

WISCONSIN DEPARTMENT OF REVENUE — POWER OF ATTORNEY (FORM A-222)

I, [TAXPAYER NAME], hereby appoint the above-named representative as my attorney-in-fact for all matters relating to the tax types and periods identified, with authority to receive confidential information protected by Wis. Stat. § 71.78, sign waivers and extensions, and otherwise represent me before the Wisconsin Department of Revenue.

[________________________________]

[TAXPAYER SIGNATURE] — Date: [__/__/____]

2. INITIAL RESPONSE TO AUDIT NOTICE

[DATE]

VIA MY CASE MANAGER PORTAL — and —
VIA CERTIFIED MAIL (CONFIRMATION COPY)

[AUDITOR NAME], Revenue Agent
Wisconsin Department of Revenue
[DIVISION — Income/Sales/Excise]
[ADDRESS]

Re: Acknowledgment of Audit Notice
Taxpayer: [NAME]
SSN / FEIN: [ID NUMBER]
Audit Number / Case ID: [NUMBER]
Audit Type: ☐ Office Audit (Wis. Stat. § 71.74(1)) ☐ Field Audit (Wis. Stat. § 71.74(2))
Tax Type(s): [INCOME / FRANCHISE / SALES / USE / WITHHOLDING]
Tax Period(s) Under Audit: [YEAR(S)]

Dear [AUDITOR NAME]:

This letter acknowledges receipt of the Wisconsin Department of Revenue's audit notice dated [DATE] (received [DATE]). The undersigned represents Taxpayer pursuant to the enclosed Power of Attorney (Form A-222).

Initial Position and Cooperation. Taxpayer intends to cooperate fully with this audit and to provide all relevant records to the extent required by Wis. Stat. § 71.80(9) and Wis. Admin. Code § Tax 2.07. Taxpayer reserves all substantive and procedural rights, including those guaranteed by the Wisconsin Taxpayer Bill of Rights (Wis. Stat. § 73.03(60); DOR Publication 114).

Scheduling. Pursuant to Wisconsin DOR audit guidelines, please schedule the initial conference at a mutually convenient time. Taxpayer requests that the audit be conducted at [REPRESENTATIVE'S OFFICE / TAXPAYER'S PLACE OF BUSINESS], and that all communications be directed through undersigned counsel/representative.

Preliminary Information Requested. To facilitate efficient audit conduct, please provide:

• ☐ A complete list of issues / areas under examination;
• ☐ The expected duration and scope of the audit;
• ☐ All Information Document Requests in writing through My Case Manager;
• ☐ A reasonable response time of no fewer than 21 days for each IDR;
• ☐ Identification of any third-party information returns or matched data the Department is relying upon.

Confidentiality. All records and information provided are confidential under Wis. Stat. § 71.78 and shall be used solely for purposes of this audit.

Respectfully,

[________________________________]

[REPRESENTATIVE NAME]

3. INFORMATION DOCUMENT REQUEST (IDR) RESPONSE

[DATE]

VIA MY CASE MANAGER PORTAL

[AUDITOR NAME], Revenue Agent
Wisconsin Department of Revenue

Re: Response to Information Document Request [IDR NUMBER] dated [DATE]
Taxpayer: [NAME] — Audit No. [NUMBER]
Tax Period(s): [YEAR(S)]

Dear [AUDITOR NAME]:

The undersigned, on behalf of Taxpayer, submits the following responses to the Information Document Request (IDR) referenced above. Documents are produced subject to the General Objections set forth in Section 3.4 below.

3.1. Scope and General Objections

3.1.1. Taxpayer objects to any request that exceeds the scope of the audit notice or the statutory authority of the Department under Wis. Stat. § 71.74 or § 77.59.

3.1.2. Taxpayer objects to requests for documents protected by the attorney-client privilege, the work-product doctrine, or the federally recognized tax-practitioner privilege under I.R.C. § 7525 (to the extent applicable in state proceedings).

3.1.3. Taxpayer reserves the right to supplement these responses, withdraw productions made in error, and produce additional documents as discovered.

3.1.4. Production of any document does not waive any privilege, objection, or defense, and is without prejudice to Taxpayer's right to contest any proposed adjustment.

3.2. Itemized Responses

3.3. Privilege Log (if any documents withheld)

3.4. Time and Format

3.4.1. Documents are produced in [PDF / NATIVE / TIFF] format via My Case Manager. Bates numbering begins at TP-000001.

3.4.2. The undersigned will respond to follow-up questions during the [___]-day period commencing [DATE].

Respectfully,

[________________________________]

[REPRESENTATIVE NAME]

4. POSITION STATEMENT / AUDIT MEMORANDUM

MEMORANDUM

To: [AUDITOR NAME], Wisconsin Department of Revenue
From: [REPRESENTATIVE NAME], on behalf of Taxpayer [NAME]
Re: Position Statement — [ISSUE DESCRIPTION]
Date: [__/__/____]

4.1. Issue Presented

Whether [STATE THE PRECISE LEGAL/FACTUAL ISSUE] for the [YEAR(S)] audit period.

4.2. Short Answer

[ONE-PARAGRAPH SUMMARY OF TAXPAYER'S POSITION]

4.3. Statement of Facts

4.3.1. Taxpayer is [ENTITY DESCRIPTION, BUSINESS, JURISDICTION].

4.3.2. During [YEAR(S)], Taxpayer [FACTUAL HISTORY OF TRANSACTION OR REPORTING POSITION].

4.3.3. The relevant documentary evidence includes [LIST OF EXHIBITS].

4.4. Applicable Law

4.4.1. Wis. Stat. § [____] provides: "[QUOTE OR PARAPHRASE]".

4.4.2. Wis. Admin. Code § Tax [____] further provides: "[QUOTE OR PARAPHRASE]".

4.4.3. The Wisconsin Supreme Court has interpreted these provisions in [CASE], holding that [HOLDING].

4.4.4. The Tax Appeals Commission has reached similar conclusions in [TAC DOCKET NO.], [CITATION].

4.5. Analysis

4.5.1. Applying the foregoing authorities to the documented facts, Taxpayer's reporting position is correct because [REASONING].

4.5.2. The Department's apparent position is contrary to the statutory text because [CONTRARY ANALYSIS].

4.5.3. Even under the Department's interpretation, the proposed adjustment is excessive because [QUANTITATIVE ARGUMENT].

4.6. Conclusion and Requested Action

For the foregoing reasons, Taxpayer respectfully requests that the Department withdraw the proposed adjustment relating to [ISSUE] and accept Taxpayer's reporting position as filed.

5. RESPONSE TO NOTICE OF PROPOSED AUDIT REPORT

[DATE]

[AUDITOR NAME] — Wisconsin DOR

Re: Response to Notice of Proposed Audit Report
Audit No. [NUMBER] — Taxpayer [NAME]

Dear [AUDITOR NAME]:

Taxpayer has reviewed the Notice of Proposed Audit Report dated [DATE] and indicates the following:

5.1. Status. ☐ Full Agreement ☐ Partial Agreement ☐ Total Disagreement.

5.2. Issues Agreed. Taxpayer agrees to the following adjustments only: [LIST].

5.3. Issues Disagreed. Taxpayer disagrees with the proposed adjustments listed below and reserves all rights to petition for redetermination under Wis. Stat. § 71.88 (income/franchise) or Wis. Stat. § 77.59(6) (sales/use) upon issuance of a formal Notice:

5.4. Penalty Abatement. Taxpayer requests abatement of all penalties for reasonable cause as set forth in Section 6 below.

5.5. Final Conference. Taxpayer requests a final conference under Wisconsin DOR audit procedures before issuance of the Notice of Amount Due.

Respectfully,

[________________________________]

[REPRESENTATIVE NAME]

6. PENALTY DEFENSE AND REASONABLE-CAUSE STATEMENT

6.1. Penalties at Issue

6.2. Reasonable-Cause Standard

Wisconsin penalties may be abated for reasonable cause under Wis. Stat. § 71.83(1)(c) and Wis. Stat. § 77.60(9). Reasonable cause exists when the taxpayer exercised ordinary business care and prudence yet was unable to comply.

6.3. Specific Reasonable-Cause Grounds

6.3.1. Reliance on competent professional advice. Taxpayer relied on [CPA / TAX ATTORNEY / OUTSIDE PREPARER] who provided written advice that the position taken was correct (see Exhibit __). See generally IRC § 6664(c) standards as persuasive authority.

6.3.2. Reliance on published DOR guidance. Taxpayer relied on Wisconsin DOR Publication [NUMBER] / Tax Bulletin [NUMBER] issued [DATE], which supports Taxpayer's position.

6.3.3. Records compliance. Taxpayer maintained complete books and records under Wis. Stat. § 71.80(9), and the Department's reconstruction is therefore based on records, not on Taxpayer's failure to keep records — meaning the 25% records penalty under § 71.83(1)(a)7. is inapplicable.

6.3.4. Good-faith reporting position. The reporting position has substantial authority under the statute, regulations, and case law summarized in Section 4 above; the taxpayer disclosed all material facts.

6.3.5. No history of noncompliance. Taxpayer has timely filed and paid Wisconsin tax for [NUMBER] prior years without prior assessment.

6.4. Conclusion

For these reasons, Taxpayer respectfully requests full abatement of all penalties.

7. RECORDS RETENTION AND PRODUCTION COMPLIANCE

7.1. Statutory Records-Retention Duty

Under Wis. Stat. § 71.80(9), every person liable for income/franchise tax must keep "permanent books of account or records, including inventories, sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown" on the return. Sales-tax records must be kept under Wis. Stat. § 77.61(4) and Wis. Admin. Code § Tax 11.92.

7.2. Recommended Retention Periods

7.3. Records-Failure Penalty

Under Wis. Stat. § 71.83(1)(a)7., taxes assessed upon information not contained in records required by Wis. Stat. § 71.80(9) carry a penalty of 25% of the tax. To avoid this penalty, Taxpayer must demonstrate that adequate records were maintained and produced.

7.4. Production Checklist

• ☐ All federal returns filed with the IRS for audit periods
• ☐ All Wisconsin income/franchise returns filed
• ☐ General ledger, trial balance, sub-ledgers
• ☐ Bank statements and reconciliations
• ☐ Apportionment workpapers (sales factor by state)
• ☐ Sales/use tax returns (Form ST-12) and supporting registers
• ☐ Resale and exemption certificates
• ☐ Federal Forms 1099, K-1, W-2 issued and received
• ☐ Intercompany agreements and transfer-pricing documentation
• ☐ Board minutes, organizational charts, and entity-classification elections

8. WISCONSIN PRACTICE NOTES

• My Case Manager (MCM). Wisconsin DOR uses the MCM portal for secure audit communications. Always upload IDR responses through MCM and retain confirmation receipts. MCM's Requests tab and Messages tab are the canonical record of audit correspondence.
• Statute of limitations. Generally 4 years from the unextended due date of the return (Wis. Stat. § 71.77). Extended to 6 years for omissions exceeding 25% of gross income (§ 71.77(2)) and unlimited for false/fraudulent returns or failure to file (§ 71.77(5)). For sales/use, the parallel period is in Wis. Stat. § 77.59(3).
• Statute extension (Form A-150). DOR routinely requests Form A-150 to extend the assessment period. Evaluate carefully — agreeing to extend may be advisable to allow further documentation, but always negotiate scope (specific issues, defined end date).
• Federal RAR adjustments. Under Wis. Stat. § 71.76, federal Revenue Agent Reports must be reported to Wisconsin within 180 days (now 90 days post-2018 amendments — verify current rule); failure triggers penalties.
• Confidentiality. Wis. Stat. § 71.78 strictly limits disclosure of return information. Confirm POA is on file before substantive discussions; DOR personnel cannot speak with representatives without authorization.
• Wisconsin Taxpayer Bill of Rights. Wis. Stat. § 73.03(60) requires DOR to publish and follow taxpayer rights, including the right to professional treatment, clear explanations, representation, and review of adverse determinations. DOR Publication 114 lists these rights and should be cited in correspondence asserting procedural defects.
• Office vs. Field Audit. Office audits (DOR Pub. 511) are typically narrower, conducted by mail or correspondence. Field audits (DOR Pub. 501) are broader on-site examinations. Field audits trigger the right to a final conference and a Notice of Proposed Audit Report.
• Final conference rights. Always exercise the right to a final conference before any Notice is issued. New information presented at the final conference can resolve issues short of formal protest.
• Joint federal-state audits. Wisconsin participates in the IRS Federal-State Exchange Program. Coordinate federal and state defense to avoid inconsistent positions; protect privileged communications.
• Penalty abatement. Reasonable cause is fact-intensive. Document reliance on professionals, internal controls, and prior compliance history contemporaneously.
• Voluntary Disclosure Program. For unfiled or under-reported periods, Wisconsin's Voluntary Disclosure Program offers limited look-back (typically 4 years) and waiver of penalties. Consider before audit notice issues.
• Refund opportunities. Wisconsin allows offset of refund claims against deficiencies under Wis. Stat. § 71.75 and § 77.59. Identify and assert refund claims (e.g., overlooked credits, prior-year overpayments) before the audit closes.

9. SOURCES AND REFERENCES

• Wis. Stat. § 71.74 (Office and field audits) — https://docs.legis.wisconsin.gov/statutes/statutes/71/xiv/74
• Wis. Stat. § 71.76 (Federal adjustments) — https://docs.legis.wisconsin.gov/statutes/statutes/71/xiv/76
• Wis. Stat. § 71.77 (Statute of limitations) — https://docs.legis.wisconsin.gov/statutes/statutes/71/xiv/77
• Wis. Stat. § 71.78 (Confidentiality) — https://docs.legis.wisconsin.gov/statutes/statutes/71/xiv/78
• Wis. Stat. § 71.80 (Records requirement) — https://docs.legis.wisconsin.gov/statutes/statutes/71/xiv/80
• Wis. Stat. § 71.83 (Civil penalties) — https://docs.legis.wisconsin.gov/statutes/statutes/71/xiii/83
• Wis. Stat. § 73.03(60) (Taxpayer Bill of Rights) — https://docs.legis.wisconsin.gov/statutes/statutes/73/03/60
• Wis. Stat. § 77.59 (Sales/use deficiency and refund) — https://docs.legis.wisconsin.gov/document/statutes/77.59
• Wis. Admin. Code § Tax 2 (Income/franchise administration) — https://docs.legis.wisconsin.gov/code/admin_code/tax/2
• Wis. Admin. Code Ch. Tax 11 (Sales/use tax) — https://docs.legis.wisconsin.gov/code/admin_code/tax/11
• DOR Publication 114 (Taxpayer Bill of Rights) — https://www.revenue.wi.gov/DOR%20Publications/pb114.pdf
• DOR Publication 501 (Field Audit of Wisconsin Tax Returns) — https://www.revenue.wi.gov/DOR%20Publications/pb501.pdf
• DOR Publication 506 (Taxpayers' Appeal Rights) — https://www.revenue.wi.gov/DOR%20Publications/pb506.pdf
• DOR Publication 511 (Office Audit of Wisconsin Tax Returns) — https://www.revenue.wi.gov/DOR%20Publications/pb511.pdf
• DOR My Case Manager FAQ — https://www.revenue.wi.gov/Pages/FAQS/mta-my-case-manager.aspx
• Wisconsin DOR Audit FAQ — https://www.revenue.wi.gov/Pages/FAQS/ise-audit.aspx

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. An attorney licensed in Wisconsin or a Wisconsin CPA must review and customize this document before submission to the Wisconsin Department of Revenue. Wisconsin tax law and DOR procedures change frequently; verify all citations, deadlines, and forms before use.