7 Habitual Mistakes Companies Make – Chapter 4 (1)

TaxConnections Blog Post

Chapter 4

Insular? Be come More Transparent

Executive Summary

THE FOLLOWING POINTS are an extract from a survey* conducted over a period of two years and demonstrates the fact that the function of tax compliance within businesses is very insular and lacks the requisite interaction with other key persons in the business.

• No documented tax strategy – 78%

• No regular monthly communication between tax compliance officer and heads of transactions – 50%

• No regular monthly communication between tax compliance officer and heads of operation – 60%

• Does the board discuss tax strategy and tax planning: mostly never or don’t know – 70%

The tax compliance officer is usually from an accounting background and compiles his or her information based on the financial information he or she receives from other people. The problem with this is that the tax compliance officer is not always in the position to communicate with the authors of this information so as to get to the “tax truth.”

A system must be created which allows the easy flow of information to the tax compliance officer of more information based on the “raw facts.”

Tax compliance must be broadened to include a wider Tax Risk Management process, where the interaction with the IRS is more carefully planned. Tax mistakes should be identified and self-disclosed long before the IRS decides to audit. If there is any interaction with the IRS, ensure their full compliance with the laws and regulations that govern them, to ensure that they go about their business in a fair, reasonable, transparent , unbiased, and accountable manner. All these words are pregnant with meaning and must be carefully applied by taxpayers against the IRS in dealing with the technical merits of any IRS audit or investigation. Often members of the tax team will be able to give guidance on technical, procedural, strategic, and tactical aspects of any interaction with the IRS.

By remaining insular in the approach to tax risk and tax compliance, the businesses will only cause long-term financial distress which could have been avoided by employing some of the principles mentioned in this special report.

Chart researched on:  *

In accordance with Circular 230 Disclosure

International Tax Attorney, EA, US Tax Court Practitioner in the USA, Counsel of the High Court in South Africa, adjunct Professor of International Tax at Thomas Jefferson School of Law.

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