Case of Checking Information –

FOR INSTANCE, A tax compliance officer in a large corporation recently decided to review over a period of sixty minutes the tax pack reports submitted to him by the financial manager that had excluded certain deductions which had been deducted for accounting purposes. There were numerous such situations giving rise to “disallowable deductions” of over $2 million. On closer examination by the tax compliance officer he discovered that all the financial managers had made the same mistake.  Expenses they wanted to disallow for tax purposes were all for marketing purposes and were clearly deductible, but they had been marked not deductible, because certain employees who enjoyed these benefits had not been subjected to fringe benefit tax. The two concepts are completely different, and there was no reason to not deduct the expenses albeit the need to look at the fringe benefits.

In accordance with Circular 230 Disclosure

Daniel N Erasmus

International Tax Attorney, EA, US Tax Court Practitioner in the USA, Counsel of the High Court in South Africa, adjunct Professor of International Tax at Thomas Jefferson School of Law.