Financial reporting standards governing the
preparation of financial statements cater for a wide audience of users
including shareholders, creditors and employees. Although financial statements
are the primary source of information when preparing a corporate entity’s
income tax return, they are not specifically tailored for tax reporting.
Accountants and tax practitioners need to
understand the differences between accounting standards and tax legislation to
ensure that the entity’s tax liability is determined correctly and to ensure
accurate financial reporting of taxation.
When preparing financial statements,
accountants also need to prepare certain reconciliations to enable the entity
to discharge its burden of proof in terms of section 102 of the Tax
Administration Act, 2011. Such reconciliations are especially useful when the
entity is required to submit a supplementary declaration (IT14SD).
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.