Due diligence is an essential part of tax preparation. It’s much more than a logical practice; it’s also an ethical requirement to protect yourself and your client from costly penalties and liabilities. Tax due diligence is complex and requires a great amount of diligence, including checking the information of a customer to ensure that it’s accurate.

A thorough review of tax records is essential to the success of an M&A transaction. It can ensuring deal success with VDR’s meticulous document organization assist a business negotiate a fair price, and also reduce the costs of integration after a deal. Furthermore, it helps to identify compliance issues that could affect the structure of the deal as well as its valuation.

For example A recent IRS decision highlighted the importance of examining documentation to support entertainment expense claims. Rev. Rul. Rul.

It is also crucial to look into the unclaimed property compliance requirements and other reporting requirements for domestic and foreign organizations. IRS and other tax authorities are also looking into these areas. It is also important to evaluate a company’s standing in the market, and take note of changes that could impact financial performance metrics and valuation. For instance, if the petroleum retailer was operating at an overpriced margin in the industry and its performance indicators could be inflated when the market returns to normal pricing. Doing tax due diligence could assist in avoiding these unexpected surprises and give the buyer the confidence that the transaction is successful.