What is TAX Compliance ?
Compliance with local accounting legislation, standards and reporting timeliness is an important requirement in expanding into a new territory. With the speed of change in the tax and accounting laws in Mongolia, it may be difficult for companies to stay on top of changes both to the laws and their application in your tax filing and compliance procedures.
Additionally, due to uncertainties surrounding the interpretation of tax laws, there has been an increase in disputes arising. The increasing sophistication and expertise of the tax authority means that the taxpayer, now more than ever, needs support and advice from experts at all stages of the tax compliance life cycle. Requirement for compliance increases with as the businesses grow. So, the businesses should also keep changing compliance procedures along with the changes in the external and internal environments. This will help them grow smoothly without any intervention from regulatory authorities. Requirement to obey legal laws and follow company policies may vary from business to business. Following and acting responsibly in the legal and ethical environment can add value to the organization and which in turn will save a lot of time, effort and cost.
What is Tax Compliance required?
For an individual, this means that all personal income tax returns (Forms 1040) must be submitted. Keep in mind an extension to file a return is not an extension to pay. Therefore, if a balance is expected on any return on extension, it should be filed at once so it can be included in the resolution. In addition, if required, sufficient year to date estimated income tax deposits must be made in order to show compliance.
For a business, all payroll tax returns (Forms 941), unemployment returns (Forms 940) and corporate income or partnership returns (Forms 1120 & 1065) must be filed. Primarily the business must show that in the quarter in which it is currently in, sufficient and timely payroll tax deposits have been made. If current deposits are late, sufficient payments to cover penalties should be addressed as well.
Businesses, on the other hand, must align their accounting, reporting, and tax filing processes with a different set of laws and regulations than those governing personal tax filing. As The Balance pointed out, in addition to paying income tax, business entities must also pay:
• Sales tax on the merchandise and services they sell in specific states
• Property taxes on their real estate assets
• Excise taxes and other administrative taxes
• Employment and payroll taxes
• Franchise or gross receipts taxes (in certain states)
• Taxes on the dividends the company provides to its shareholders
Any failure to observe, report, and pay taxes according to these laws can come with significant consequences for a business. This includes fines and other penalties as well as impacts to their brand reputation.
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