What is tax reconciliation?

Overview

Your indirect tax payable account in your general ledger tracks how much you owe jurisdictions for your returns. When your tax return is submitted and payment made to a jurisdiction, you generally debit tax payable and credit cash. At the end of the period, you need to reconcile the amount paid on your returns to the amount booked in your general ledger. 

• Ensures the accuracy and integrity of your financial records — Reconciliation helps identify any discrepancies or inconsistencies between your sales tax filings, general ledger entries, and actual transactional data. This process allows you to rectify errors promptly, preventing potential financial inaccuracies that could lead to penalties or regulatory issues.
• Fosters compliance with tax regulations — By aligning your sales tax filings with your general ledger, you ensure that your business is meeting its tax obligations accurately. This compliance avoids penalties and builds trust with tax authorities, showcasing your commitment to maintaining accurate financial records and fulfilling tax responsibilities.
• Enhances financial and tax liability transparency — It helps in making informed financial decisions, strategic planning, and forecasting by ensuring that your financial data accurately reflects your tax obligations. Overall, this process strengthens internal controls, reduces the risk of errors, and supports a more robust financial framework for your business operations.

Anrok built the Reconciliation page to help fast-track your tax reconciliation by aggregating your sales by jurisdiction. There, you can toggle balances to view a snapshot of your starting and ending balances at any time.