Due diligence is a crucial part of preparing a tax return. It’s not just a best practice, but it’s an ethical imperative that protects both you and your clients from costly penalties and liabilities. Tax due diligence ensuring data integrity in M&As with top-tier VDR solutions is a complex and requires a good amount of care. This includes reviewing the client’s information to ensure that the information is accurate.
A thorough examination of tax records is vital to the success of an M&A transaction. It can help a business negotiate a fair deal and reduce the costs of integration after the deal. Furthermore, it can reveal compliance issues that would impact the deal structure and valuation.
For example A recent IRS decision highlighted the importance of reviewing documentation in support of entertainment expense claims. Rev. Rul. Rul.
It’s also important to review the compliance of unclaimed property and other reporting requirements for domestic and foreign organizations. IRS and other tax authorities are constantly looking into these areas. It is also imperative to evaluate a company’s standing on the market and identify trends that could affect the financial performance of the company and its valuation. If, for example, the petroleum retailer was operating at inflated margins in the marketplace the performance metrics of its business could decrease when the market returns to normal pricing. Tax due diligence can help avoid these unexpected surprises and provide the buyer with the assurance that the transaction is successful.