ACCOUNTING & TAXATION DETAILS

Accounting & Taxation Planning

Tax accounting is the means of accounting for tax purposes. It applies to everyone—individuals, businesses, corporations, and other entities. Even those who are exempt from paying taxes must participate in tax accounting. The purpose of tax accounting is to be able to track funds (funds coming in as well as funds going out) associated with individuals and entities.

Even legally tax-exempt organizations use tax accounting as they are required to file annual returns.

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How it Works

• Tax Accounting for an Individual
  For an individual taxpayer, tax accounting focuses primarily upon items such as income, qualifying deductions, investment gains or losses, and other transactions that affect the individual’s tax liabilities. This limits the amount of information that is necessary for an individual to manage an annual tax return, and while a tax accountant can be used by an individual, the accountant can assist an individual to plan ahead and anage liabilities. Meanwhile, general accounting would involve the tracking of all funds coming in and out of the persons' possession regardless of the purpose, including personal expenses that have no tax implications.
• Tax Accounting for a Business
  Business requirements and complexities involving tax liabilities dictates more information must be analyzed as part of the tax accounting process. While the company’s earnings, or incoming funds, must be tracked just as they are for the individual, there is an additional level of complexity regarding the outgoing funds which are directed towards certain business obligations. This can include funds directed towards specific business expenses as well as funds directed towards shareholders. While it is also not required that a business use a tax accountant to perform these duties, it is fairly common in larger organizations due to the complexity of the records involved.
• Tax Accounting for a Tax-Exempt Organization
  In instances where an organization is tax-exempt, tax accounting is necessary. This is due to the fact that most organizations must file annual returns. They must provide information regarding any incoming funds, such as grants or donations, as well as how the funds are used during the organization’s operation. This helps ensure that the organization adheres to all laws and regulations governing the proper operation of a tax-exempt entity.