Sequence often goes like this, company produce their numbers for the year-end. Then the information is sent over to the outside tax accountant. Then the outside tax accountant makes the final adjustments and the numbers are completed by the tax accountant with our various adjustments that he or she might have. Then the tax return comes back to the client. They sign off on it and the year is done.

Right? Not necessarily so, still another step that often gets overlooked.

That next step is adjusting the financial statement back to the tax return as applicable. That doesn’t include any things that are intended to be differences between the books and the tax return, such as for meal and entertainment expenses and other miscellaneous where the tax law treats them differently than the books. What it does mean is getting the other adjustments posted back into the general ledger, so that on a book basis not include the unusual tax item that the books agree with the tax return.

What happens when that doesn’t work that way or it’s forgotten about? Next year work is handed off to the tax accountant. They review the company books and they notice that the beginning balance does not tie out with what they show to the tax return, adjustment has to be made and it slows down the whole process.

So, if you happen to have had some adjustments made to your tax return from your final books during this tax season, make sure you go back and correct your books for any of those final adjustments done by your outside tax accountants. That will make it a lot easier come the next year.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
Bringing new insights on results and maximizing company value