Why risk exposing your company to penalties in a tax audit? At Physical Acoustics Corp., in Lawrenceville, N.J., chief financial officer John Heenan uses the company's board minutes to provide documentation on all significant tax-related decisions.

* Document important discussions, as well as votes, as they happen. "You can't go back and try to impute motivation to prior board decisions with any degree of success," warns Heenan. "But if we can show why we made a decision, the tax authorities can't accuse us of just trying to dodge taxes, after the fact, once we've seen that we've had a particularly good year."

* Refer to long-term corporate policies when board minutes relate to important tax decisions. "It helps to show that we were conscious of corporate precedents," Heenan explains, "even if we were also considering our tax benefits."

* Be especially scrupulous on matters with high audit potential. "With some decisions, like bonuses, there's always the risk of the IRS coming in and saying, 'How do we know you didn't just make the decision once the year ended and you saw you had some leftover cash?' It's cleaner with both the IRS and your key executives if you can point to minutes as proof of the year's guidelines." -- Jill Andresky Fraser

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