40+ Tax Associate Interview Questions and Answers

Answers to various tax-related questions for a Tax Associate interview.

• Traditional IRA is funded with pre-tax dollars, while Roth IRA is funded with after-tax dollars.

• Sch H is used to report household employment taxes.

• Home office expenses can be deducted up to the amount of net income on Sch C.

• Liability is a legal obligation while provision is a potential liability.

• Prepaid expenses are expenses paid in advance but not yet incurred.

• Amortization is the process of spreading out ...read more

Choosing a tax structure at BDO involves understanding client needs and regulatory frameworks to optimize tax efficiency.

• Consider the client's business model: For example, a corporation may benefit from a C-Corp structure for limited liability and tax advantages.

• Evaluate the tax implications of different structures: An LLC might offer pass-through taxation, which can be beneficial for small businesses.

• Assess the client's growth plans: A partnership structure may be suitable f...read more

K-1 is a tax form used to report income, deductions, and credits from partnerships, S corporations, estates, and trusts.

• K-1 is used to report each partner's share of income, deductions, and credits from a partnership.

• S corporations and C corporations are different in terms of taxation, with S corporations passing income, deductions, and credits through to shareholders via K-1 forms, while C corporations are taxed at the corporate level.

• S corporations are pass-through entities...read more

Permanent adjustments affect tax liability indefinitely, while temporary adjustments are time-bound and reverse in future periods.

• Nature of Adjustment: Permanent adjustments, like non-deductible expenses (e.g., fines), do not reverse, impacting tax liability permanently.

• Temporary Adjustments: Examples include depreciation methods; differences in tax and book depreciation will reverse over time.

• Impact on Financial Statements: Permanent adjustments affect the effective tax rate...read more

KPMG offers a dynamic environment, diverse opportunities, and a commitment to professional growth in tax consulting.

• KPMG's global presence allows for exposure to international tax issues, enhancing my understanding of global markets.

• The firm's commitment to innovation in tax technology aligns with my interest in leveraging data analytics for tax solutions.

• KPMG's emphasis on professional development through training programs and mentorship is crucial for my career growth.

• The c...read more

Bad debts are recorded as an expense in the income statement and as a reduction in accounts receivable in the balance sheet.

• Bad debts are debts that are unlikely to be collected from customers.

• The accounting procedure for bad debts involves estimating the amount of bad debts and recording them as an expense in the income statement.

• The allowance method is commonly used to estimate bad debts.

• Under the allowance method, a percentage of accounts receivable is estimated to be unco...read more

Golden rules of accountancy are basic principles that guide the process of recording financial transactions.

• There are three golden rules of accountancy: Debit the receiver, Credit the giver; Debit what comes in, Credit what goes out; Debit all expenses and losses, Credit all incomes and gains.

• These rules help ensure that financial transactions are recorded accurately and consistently.

• For example, when a company receives cash from a customer, the cash account is debited (incre...read more

Taxation is the process of collecting money from individuals and businesses by the government to fund public services and programs.

• Taxation is a legal process that involves the government collecting money from individuals and businesses based on their income, property, or other factors.

• The collected money is used to fund public services and programs such as education, healthcare, infrastructure, and defense.

• Taxation can be direct or indirect, and can take the form of income t...read more

Contingent assets and liabilities are potential assets and liabilities that may arise in the future based on certain events.

• Contingent Asset: potential assets that may arise in the future if certain events occur, such as a pending lawsuit or a potential tax refund.

• Contingent Liability: potential liabilities that may arise in the future if certain events occur, such as a pending lawsuit or a warranty claim.

• Contingent assets and liabilities are not recognized in the financial s...read more

Federal taxes are mandatory contributions levied by the government on income, property, and sales to fund public services.

• Types of federal taxes include income tax, payroll tax, and corporate tax.

• Income tax is progressive, meaning higher earners pay a higher percentage; for example, the 2023 tax brackets range from 10% to 37%.

• Payroll taxes fund Social Security and Medicare, typically deducted from employee wages.

• Corporate taxes are levied on a corporation's profits, with a fe...read more

The three golden rules of accounting are the rules of debit and credit, which are: 1. Debit the receiver, credit the giver 2. Debit what comes in, credit what goes out 3. Debit expenses and losses, credit income and gains

• Debit the receiver, credit the giver - for example, when a company receives cash from a customer, the cash account is debited and the accounts receivable account is credited

• Debit what comes in, credit what goes out - for example, when a company purchases inve...read more

I have prepared over 200 tax returns for individuals and small businesses.

• I have experience preparing both individual and small business tax returns

• I have prepared over 200 tax returns in total

• I am familiar with various tax forms and regulations

Tax associates are responsible for assisting clients with tax planning, compliance, and audit support.

• Assist clients with tax planning to minimize tax liabilities

• Ensure compliance with tax laws and regulations

• Provide support during tax audits and investigations

• Prepare and review tax returns for individuals and businesses

• Stay updated on changes in tax laws and regulations

US taxation involves federal, state, and local taxes on income, property, and goods/services.

• US taxation is based on a progressive tax system, where higher income earners pay a higher percentage of their income in taxes.

• Income tax is the largest source of revenue for the US government, with rates varying based on income levels.

• Other types of taxes in the US include payroll taxes, sales taxes, property taxes, and estate taxes.

• Tax laws are constantly changing, with updates and ...read more

Understanding accounting principles is crucial for tax associates to ensure compliance and accurate reporting.

• Accounting principles include the Generally Accepted Accounting Principles (GAAP) which guide financial reporting.

• Key concepts include the accounting equation: Assets = Liabilities + Equity.

• Accrual vs. cash accounting: Accrual recognizes revenue when earned, cash recognizes when received.

• Example: A company sells a product on credit; under accrual accounting, revenue i...read more

I have prepared over 100 tax returns for individuals and small businesses.

• I have experience preparing both individual and small business tax returns

• I am familiar with various tax forms such as 1040, Schedule C, and Schedule E

• I have worked with clients to maximize deductions and credits

• I have experience with tax software such as TurboTax and TaxAct

Yes, I read newspapers regularly to stay updated on current events and developments.

• I read newspapers to stay informed about current events and developments in the tax field.

• Reading newspapers helps me stay up-to-date on changes in tax laws and regulations.

• I also read newspapers to understand the impact of current events on the economy and tax policies.

Depreciation is the allocation of the cost of a tangible asset over its useful life.

• Depreciation is a non-cash expense that reduces the value of an asset over time.

• It reflects the wear and tear, aging, or obsolescence of an asset.

• Common methods of calculating depreciation include straight-line, double declining balance, and units of production.

• Examples of depreciable assets include buildings, vehicles, machinery, and equipment.

Accounting principles are the fundamental guidelines and rules that govern the field of accounting.

• Accounting principles provide a framework for recording, analyzing, and reporting financial transactions.

• They ensure consistency, accuracy, and transparency in financial statements.

• Examples of accounting principles include the matching principle, revenue recognition principle, and the cost principle.

• These principles help in making informed financial decisions and assessing the f...read more

Accumulated depreciation is the total amount of depreciation expense that has been recorded for an asset since it was acquired.

• Accumulated depreciation is a contra asset account, meaning it has a credit balance.

• It represents the total depreciation expense recognized on an asset over its useful life.

• Accumulated depreciation is used to reduce the carrying amount of an asset on the balance sheet.

• For example, if a company purchased a machine for $10,000 with a useful life of 5 ye...read more

Form 1065 is used for partnership tax returns in the United States.

• Form 1065 is used to report the income, deductions, gains, losses, etc. from the operation of a partnership.

• Partnerships are not taxed on their income, but instead pass through any profits or losses to their partners.

• Form 1065 is due on the 15th day of the 3rd month after the end of the partnership's tax year.

• Partnerships with more than 100 partners are required to electronically file Form 1065.

• Form 1065 also ...read more

Understanding principles of accounting and journal entries is essential for a Tax Associate role.

• Principles of accounting include matching principle, revenue recognition principle, and cost principle

• Journal entries are used to record financial transactions in the accounting system

• Examples of journal entries include recording revenue, expenses, and asset purchases

The last date for filing ITR for individuals is usually July 31st of the assessment year.

• The last date for filing ITR for individuals is typically July 31st of the assessment year.

• For example, for the financial year 2020-2021, the last date for filing ITR would be July 31, 2021.

• It is important to file the ITR on time to avoid penalties and interest charges.

Deferred revenue is income received by a company in advance of earning it, resulting in a liability on the balance sheet.

• Deferred revenue represents a liability for the company until the goods or services are delivered to the customer.

• It is common in subscription-based businesses where customers pay upfront for services that will be provided over time.

• Once the revenue is earned, it is recognized on the income statement.

• Examples include magazine subscriptions, software license...read more

Accrued items on the balance sheet refer to expenses that have been incurred but not yet paid.

• Accrued items are liabilities that represent expenses that have been recognized but not yet paid.

• They are recorded on the balance sheet as a current liability.

• Examples include accrued salaries, accrued interest, and accrued taxes.

• Accrued items are typically adjusted at the end of an accounting period to reflect the accurate financial position of a company.

Vlookup & Hlookup are Excel functions used to search for a value in a table and return a corresponding value.

• Vlookup searches for a value in the first column of a table and returns a value in the same row from a specified column.

• Hlookup searches for a value in the first row of a table and returns a value in the same column from a specified row.

• Both functions are commonly used in Excel for data analysis and manipulation.

• Example: =VLOOKUP(A2, B2:D10, 3, FALSE) - This formula se...read more

Accrual concept is a principle of recognizing revenue and expenses when they are incurred, regardless of when cash is exchanged.

• Revenue and expenses are recorded when they are earned or incurred, not when cash is received or paid.

• This concept ensures that financial statements accurately reflect the financial position of a company.

• For example, if a company provides services in December but doesn't receive payment until January, the revenue is still recognized in December under...read more