The economic squeeze is putting a squeeze on the corporate tax function, as tax departments brace for more audit work and scrounge for every break they can find.

In a recent Webcast survey by the Tax Governance Institute of KPMG, 30 percent of 500 participants said the increased likelihood of a tax audit is their most daunting tax risk today, acknowledging that government agencies are hungry for cash. At the same time, 37 percent of respondents said they’re also looking to improve their own corporate cash flow by ferreting out every tax refund, credit, and incentive they can find.

“Taxing authorities in a downturn time are going to be more aggressive in finding ways to increase revenues at the federal, state, and local levels,” said Hank Gutman, principal at KPMG and executive director of the TGI. “When tax jurisdictions begin to look for more revenues, they obviously look to the taxpayers. That increases pressure to assure their compliance through their returns have been appropriate.”

According to 44 percent of respondents, companies have focused most intently on their compliance and reporting functions within the tax department in the past six months. One-fifth said tax savings has been a primary focus. Nearly half of respondents said tax staffing has been constant in the past six months, but 28 percent reported a decline in in-house tax resources.

Gutman said companies are wise to get their documentation and reporting procedures locked down if they’re genuinely concerned about audit risk. “What are the high risk areas where you see potential for audit activity?” he said. “Look at the documentation of the types of things that give rise to audit issues. Make sure they’re documented accurately, contemporaneously, comprehensively. Those are the kids of things you need to focus on if you’re worried about audit being a potential problem.”