What is Tax Planning?
Tax Planning basically analyzes the financial position through tax’s aspect. Effective Tax Planning thus demands a lot more than just maintaining and managing the assets. So if Tax Planning is not there in your current financial strategy, it’s time to get one.
According to a recent survey, tax stands as the highest business risk in recent times. Due to which many organisations are required to go for a comprehensive risk oriented approach while managing their taxation. A properly planned tax proves beneficial for a business that saves them a lot of money with beneficiaries like tax credit along with reduced penalties and interest.
Our experts thus bring forth some measures that can help you avoid the risks while Tax Planning:
Acknowledging risks while moving out of your expertise:
Tax Planning requires the CPA to be fully aware of the risks that a firm encounters while offering new service line. Tax Planning is not just tax compliance monitoring and thus demands much more from a CPA. CPAs are thus required to have complete understanding of the planning involved. Thus, taking up the work aptly based on their capability to do it as desired.
Before rendering new services in their business, a firm is expected to have a complete overview of the potential liabilities and risks involved. Only then, introducing new services will cater some profit instead of losses.
Mandating the Documentation:
Be it Tax Planning or any other financial matters documentation holds utmost importance. So while considering Tax Planning risk management documentation is the best way to avoid the risk of liability. CPA should focus on mandating the documentation in order to have an upper hand on another party in case of dispute.
The documentation involved need not be an official form or notary approvals and can be in a form of email that mentions the concerned details. Accountants require documents to prove their goodwill approach towards their client in case any issue prevails in coming future.
Thinking twice about the Referrals:
The referrals that are suggested by the CPAs are sometimes not quite beneficial for the firm. It’s thus required by the CPA to refer the referrals not based on their personal relations with them and on the basis of their capabilities instead. It is thus required to know about the referrals beforehand so that they render a standard of work. In case it doesn’t match the desired standards, CPA is considered equally responsible as the referral.
While providing referrals, CPAs should suggest more than one referral, thus providing various options to choose from. This helps the firm to have their referrals as per desired along with a lot of options.
Review income and expenses monthly:
Besides all the measures, one regular practise a CPA is required to adopt is a regular review of income and the expenses involved every month. It helps a CPA to manage the financial flow which makes the Tax Planning process much easier and less risky.
Tax Planning basically involves various considerations like timing and size of income and purchases along with planning for other expenditures. Besides this the investments that are selected should be in accordance with the tax filing status in order to gain profitable outcomes. CPA thus holds a great responsibility while doing so. Thus they are expected to be fully acknowledged about the latest facts and figures along with the ongoing risks that firms are facing. Besides that an overview of tax internal control strategy is mandatory for a CPA to adopt.
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