Corporate Tax Planning & Management

Corporate Tax Planning & Management

Taxes are the money paid by companies to government entities for the privilege of doing business. The amount of taxes paid by companies depends on different business factors, including the amount of sales revenue, assets owned by the business and wealth generated through various equity investments. Most companies spend copious amounts of time determining their tax liabilities to ensure they do not face penalties for the underpayment of taxes.

1. Facts

o Corporate tax planning usually starts in the company’s accounting department. Accounting employees are responsible for accurately recording and reporting of financial transactions resulting from business operations. As this information is compiled and put into the company’s financial statements, accounting management will review its accuracy and begin the tax planning and management process. Most companies set aside a portion of their profits to pay taxes when they file their tax return at year end.

Types

o Federal, state and local governments often impose a variety of business and corporate taxes on companies. These taxes may include sales and use taxes, property taxes, payroll taxes, excise taxes and annual business license taxes or regulations. Companies must plan for each tax obligation they will owe throughout the business year. Depending on the type of tax, companies may need to pay the taxes at various points during the year or at year end.

Expert Insight

o Companies may prefer to use a public accounting firm or certified public accountant (CPA) to help them plan and prepare for paying their upcoming tax liabilities. These professional accountants usually have extensive knowledge relating to government taxes and responsibility companies must use to accurately report and pay a these taxes. Companies may use public accountants throughout the year for tax planning or at year end to aid them in the corporate tax preparation process.

Considerations

o Companies may decide to use an automated accounting software package to help them record and collect sales tax information. Accounting software packages usually collect information from all departments in a company for tax planning purposes. These software packages ensure accurate collection and electronic records that may be used by companies to support the tax payments made to government entities. Electronic records may also be sent to the company’s public accountant for review before paying the tax liability.

Warning

o Failing to accurately collect and report business or corporate taxes can have severe implications on the company’s ability to conduct business. Government entities typically charge high fees and interest penalties to punish