Case Study

Avoiding Inaccurate Tax Payments

THE CHALLENGE

Overpayment of Taxes. A subsidiary of an international technology device company had inaccurate financials, which resulted in an erroneous tax payment calculation. The company had assumed that their tax preparer had reviewed its financial information for accuracy – which is a common misconception.

Signature Analytics’ Solution:

Setting Your CPA Up To Succeed

The tax preparer used the financial information provided to calculate the tax obligation. Contrary to what some companies may assume, it is not the tax preparer’s responsibility to confirm that all financial information has been inputted appropriately into the accounting system. The reality is that most tax preparers calculate the tax obligation using the financial information provided to them. The company’s responsibility is to ensure that the financial information they provide is accurate for the tax calculation to be accurate.

Better Numbers Meant A Lower Tax Obligation

We performed a detailed review and identified significant differences in financial information. When reviewing the company’s financial information, we identified several incorrect entries, including duplications of revenue entries and missing expense entries in the accounting system. Making the appropriate adjustments caused the company’s Net Income before tax balance to decrease significantly. As an outcome of this discovery, their actual tax obligation was reduced considerably as well.

Strengthening Internal Controls and Preventing Future Errors

Recognizing the importance of preventing such errors from recurring, Signature Analytics worked closely with the company to implement robust internal controls and processes. Our team of experts provided training to the client’s accounting staff, ensuring they understood the proper procedures for inputting financial data into the system. By enhancing the company’s financial reporting capabilities and fostering a culture of accuracy, we helped safeguard the client against future errors and oversights, further improving their decision-making and financial management.

ROI: Recovered $120,000 Excess Tax Payment

The company was able to file an amended return to recover the amount they had over-paid; however, the company had been in a tight cash flow position. This excess tax payment hurt the company’s operational decision-making process. Suppose they had not requested that we perform a detailed review of the financial information. In that case, they may have never known there were errors in their system, and the statute of limitations on filing an amended return may have expired.

Best Practices for Avoiding Inaccurate Tax Payments

Ensuring the accuracy of your tax payments is crucial for maintaining your business’s financial health and avoiding potential issues with tax authorities. At Signature Analytics, we’ve compiled a list of best practices to help you avoid inaccurate tax payments and maintain compliance with tax regulations.

1. Prioritize Accuracy in Financial Reporting

Accuracy is of paramount importance when it comes to tax payments. Make sure your financial information is up-to-date and accurate by implementing internal controls and thorough checks in your accounting processes. By prioritizing accuracy, you can minimize the risk of incorrect tax payments and potential penalties.

2. Reconcile Your Accounts Monthly

To maintain accurate financial records, it’s essential to reconcile your accounts monthly. Regular account reconciliation helps you identify discrepancies, errors, and potential fraud early on, allowing you to take corrective action and maintain accurate financial information for tax purposes.

3. Maintain Consistent Communication with Tax Preparers

Foster open and consistent communication between your accounting team and tax preparers. This collaboration ensures that both parties have a clear understanding of your financial position and can work together to address any discrepancies or issues that may arise during the tax preparation process.

4. Conduct a Detailed Review of Year-End Financial Statements

Before providing your financial statements to tax preparers, conduct a detailed review to ensure accuracy and completeness. By thoroughly examining your year-end financial statements, you can catch any errors or omissions and make the necessary adjustments before filing your taxes.

At Signature Analytics, we’re committed to helping you avoid inaccurate tax payments and maintain compliance with tax regulations. Contact our team of experts today to learn more about our tailored financial solutions and how we can support your business’s financial management and growth.

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Avoiding Inaccurate Tax Payments

THE CHALLENGE

Signature Analytics’ Solution:

Setting Your CPA Up To Succeed

Better Numbers Meant A Lower Tax Obligation

Strengthening Internal Controls and Preventing Future Errors

ROI: Recovered $120,000 Excess Tax Payment

Best Practices for Avoiding Inaccurate Tax Payments

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