Most US corporations with calendar year-ends file their corporate tax returns on the extended deadline of September 15. Almost invariably, these returns are prepared by a third party, which submits the return to the CFO, CEO or other company officer for signature. Given the complexity of US corporate tax returns, the human propensity to leave tasks to the last minute and the ability of the preparer to file electronically, it’s not unusual for a company officer to receive the completed return just prior to the deadline, and in some cases on the very day the signature is required.
Obtaining a company officer’s signature is the final step in the tax-return process before filing. By signing, the officer is essentially stating that he or she has reviewed the return and approved it as accurate. But if an officer is unfortunate enough to receive a return on or shortly before the deadline, he or she will almost certainly not be able to thoroughly review it. Corporate tax returns are after all notoriously complicated, typically containing numerous forms and attachments. So in reality, many CFOs and CEOs must simply sign away with fingers crossed, hoping (if not praying) that the preparer has been diligent.
To help company officers in this situation, we’ve prepared the following checklist of essential items to review before signing a US corporate tax return. Use it like a pilot performing a preflight checklist before takeoff. Our checklist will show you have done your diligence in not filing a false or incorrect corporate tax return. If you complete it and everything is in order, sign away!
- Review changes to tax attributes from last year to this year, including: net operating loss; R&D credit carryforward; alternative minimum tax credit carryforward; foreign tax credits
- Review the balance sheet to ensure that it make sense based on the company’s financials. (See page 5 of Form 1120.)
- Review Form 851 to ensure that it reflects all your company’s legal entities.
- If you have any foreign subsidiaries, check to make sure there is a Form 5471 for each one.
- If you have any foreign parents, check to make sure there is a Form 5472 for each parent where there is a transaction with the US company.
- Review your payroll expense on page 1, line 13 of Form 1120 to ensure that it is in the ballpark for reasonable.
- Review payments shown on the tax return to ensure they align with your income tax paid. (See page 1, line 32 of Form 1120.)
- If the P&L net income differs significantly from the financial statement net income, do you know why? Consider:
- Is there deferred revenue?
- Are there purchase accounting adjustments?
- Is the stock compensation that is not deductible on the tax return?
- Are there timing items (such as depreciation and amortization) that have reoccurred?
- Review the state filings to ensure they reflect where the company had employees during the year.
- Review the state payments to ensure they seem accurate based on where the business is primarily located.
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The contents of this article are intended for informational purposes only. The article should not be relied on as legal or other professional advice. Neither Vistra Group Holding S.A. nor any of its group companies, subsidiaries or affiliates accept responsibility for any loss occasioned by actions taken or refrained from as a result of reading or otherwise consuming this article. For details, read our Legal and Regulatory notice at: http://www.vistra.com/notices . Copyright © 2022 by Vistra Group Holdings SA. All Rights Reserved.
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