Tax Advisory Services Frequently Asked Questions
When does an organization need tax advisory support beyond routine return preparation?
Additional analysis may be useful before a transaction, entity restructuring, expansion into a new jurisdiction, ownership change, major capital investment, financing event, compensation or benefit change, accounting method decision, or significant tax controversy. Routine compliance reports completed activity. Advisory work evaluates alternatives, risks, documentation, and financial effects before management commits to a course of action.
What is a tax risk assessment?
A tax risk assessment inventories required filings, jurisdictions, material tax positions, open years, notices, examinations, controls, data sources, and supporting documentation. It then evaluates the likelihood and potential effect of errors or disputes and assigns responsibility for corrective action. The purpose is to prioritize attention based on actual exposure rather than treat every tax issue as equally significant.
How should tax considerations be incorporated into a transaction or entity decision?
Tax analysis should begin before binding terms are finalized. Management should compare reasonable structures, identify federal, state, local, and international filing effects when applicable, estimate cash tax and financial statement consequences, and document key assumptions. Legal, accounting, financing, and operational requirements also should be considered because the lowest apparent tax result may not be the most workable overall structure.
How should an organization evaluate a potential tax credit or incentive?
Confirm that the organization’s actual activities, costs, property, and timing meet the requirements under current law. The review should address interactions with other tax provisions, required elections or certifications, recordkeeping, financial statement treatment, and the risk that an unsupported position may be challenged. Contemporaneous documentation is generally more reliable than reconstructing the basis for a claim after the project is complete.
What should management expect from a year-round tax advisory process?
A year-round process should include scheduled planning checkpoints, current forecasts, updates on transactions and operational changes, monitoring of relevant law, reconciliation between tax filings and accounting records, and documented decisions. Responsibilities and deadlines should be clear. The process should focus on matters that may change an actual decision, filing obligation, cash requirement, or financial statement conclusion.
