Bookkeeping and Tax Compliance: Making the Connection

The closing of the financial year is when companies consolidate all their financial records to make sure that they are in compliance with their tax requirements for the year. This is important as compliance is needed to ensure that your operations run smoothly during the next year. Because of this, the months leading to the end of the year become the period spent on closing your books. So how do you juggle bookkeeping and tax during this busy season? 

Read: The Global Minimum Tax, Explained 
 

Understandably, bookkeeping and tax compliance are two tasks that require a lot of effort and attention to detail by a company’s accounting team. To make it easier, it is best if you can get your books in order before the set deadline for filing as this could significantly help you in addressing compliance issues.  

Think about it – if your books are in disarray, closing your books come tax season will likely become a more tedious task. You have to go over your receipts and invoices from the current financial year – and even further into the previous financial years if you are filing late. In contrast, having everything ready will keep you at ease, knowing that you won’t likely get in trouble with the Internal Revenue Service (IRS). 

 
Handling your Company Taxes 

Between bookkeeping and tax, are you still confident that you can keep your wits about you? Here are more reasons why you should keep your books up to date in time for tax season: 

Handling VAT returns and official VAT books 

Dealing with taxes is all about adhering to strict compliance issues imposed by the IRS. At the top of the list: VAT returns and official VAT books. When your invoices and receipts are organized, preparing critical business numbers that relate to VAT becomes practically effortless. 

Managing withholding Company tax returns  

One of the general rules in taxation in the US is that a certain amount of your business revenues is withheld. The specifics of the actual income dictate the computation for the tax withheld and needs to be submitted on or before the company tax return deadline. More often than not, the computation is based on a fixed rate or percentage. Going over these numbers and making sure that the withholding tax filed is accurate means having a withholding tax record to refer to – and this is why it is necessary to keep tabs on your books. 

Settling corporate income tax returns 

The structure of your business has everything to do with the income tax return you are expected to file to the IRS. In a nutshell, all businesses are expected to do income tax bookkeeping and file their income tax returns every year. However, if your business is a partnership, the IRS will not oblige you to file an annual income tax return. What you will file, instead, is an information return. An information return is a report of the income, deductions, gains and losses of the partnership without paying taxes upfront. 

The impact of your well-kept bookkeeping and tax cannot be emphasized enough. Not to mention the incentive you’ll get if you can find legitimate tax deductions – something you can do more of if your critical business numbers are on track.  

Read Next: Exploring the Impact of Cloud Accounting on Tax Compliance  

Need help with your Company’s Tax Compliance? 

D&V Philippines’ commitment to staying on top of all regulatory changes relating to tax and compliance has allowed us to effectively handle our clients’ books for over a decade. If you want to see how we do it, you can download our Accounting Outsourcing Whitepaper  here. 
 
Interested? You can contact us here and see how we can help tailor our solutions to fit your company’s specific needs! 

This post was first published on 02 October 2014 and edited 24 November 2023. Edited by: Aly Tagamolila