Broadcast Media Company
Challenge: A broadcast media company believed they needed a significant capital infusion to support their growth plans, but were uncertain when and how much capital would be required.
Signature Analytics’ Solution:
Tax preparer used the financial information provided to calculate the tax obligation. Contrary to what some companies may assume, it is not the responsibility of the tax preparer to confirm that all financial information has been inputted appropriately into the accounting system. They assume this is the case and calculate the tax obligation using the financial information provided to them. Therefore it is the company’s responsibility to ensure that the financial information they are providing is accurate for the tax calculation to also be accurate.
Performed a detailed review and identified significant differences in financial information. When reviewing the company’s financial information, we identified a number of 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 taxes balance to significantly decrease. Therefore their actual tax obligation significantly decreased as well.
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 and therefore this excess tax payment hurt the operational decisions made by the company. Furthermore, had they not requested that we perform a detailed review of the financial information 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
- Accuracy, accuracy, accuracy
- It is important to reconcile your accounts on monthly basis.
- The accounting team should maintain consistent communication with tax preparers.
- Ensure a detailed review of year-end financial statements prior to providing to tax preparers.