Question

In: Accounting

Why do we often see the word “reconciliation” in the name of tax acts?

  1. Why do we often see the word “reconciliation” in the name of tax acts?

Solutions

Expert Solution

Tax is something that is owed to and paid to the government. So it is of utmost importance to make sure that these calculations regarding these payments are made with extreme care.

Reconciliation is a term used for comparing between two sets of records and ensuring that they are in line with each other. Reconciliation is a very important part in accounting and auditing. They help in ensuring the reliability and credibillity of the data.

Now, since tax is such a payment of utmost importance, it is extremely crucial that these records are always reconciled and we have to ensure that we pay the exact amount that has to be paid according to the records. Because any shortfalls in the tax owed to the government will result in fines to the company.

Tax returns can only be filed after constant reconciliations are performed on the entire records and that is one of the reasons why the term 'reconciliation' can often be seen along with the name of tax acts.

Data in the books should never go mismatching with the data on the tax returns being filed because in case an investigation is held in the future and any mismatch is found, That would lead the company into great trouble. So Reconciliation is an integral part when it comes to Tax.

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