Much like kicking the tires on a car you’re considering buying, and then thanking your lucky stars that you did when it subsequently explodes, conducting due diligence on a target you’re considering acquiring is a must in today’s complicated world. Taxand USA surveys some of the more common issues reviewed during tax due diligence.

 

Acquiring a company and then finding out after the fact that there are substantial historical exposures and contingencies that you’re now on the hook for may lead you to wonder if you might have been better served by taking the money you spent acquiring the company out back and setting it on fire. The following should be the key due diligence areas of focus ahead of any sucessful acquisition:

 

  1. Tax return filings and payments
  2. Tax audits
  3. Uncertain tax positions
  4. Changes in methods of accounting
  5. Deferred revenue
  6. International issues
  7. Foreign bank account reporting
  8. Sales and use taxes
  9. Worker misclassification
  10. Unclaimed property

Discover more: Ten considerations in tax due diligence

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Taxand's Take

Any tax due diligence practitioners worth their salt will use what limited facts are available to them to ascertain whether a target has unrecorded historical tax liabilities. The tax rules are only becoming more complicated, so it’s critical that when you are acquiring a company you have a solid understanding of its tax posture and history.

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M&A Tax | USA

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