What is Tax Accounting? A Complete Guide to Tax Accounting for 2023

Tax accounting is the department in charge of all issues related to tax calculation and declaration in a business. So, what does a tax accountant do? How does one perform tax accounting? Let’s find out with 1Office in the article below!

1. What is tax accounting?

Tax accounting is the department directly responsible for calculating, compiling statistics, and declaring tax-related matters within a business. Complying with and ensuring tax accounting activities are a mandatory responsibility of the business regarding “taxes” to the state. At the same time, this is also a way for the state to manage the economy more effectively.   

2. What does a tax accountant do? The responsibilities of a tax accountant

The work of an accountant includes 4 main types of tasks categorized by time: daily tasks; monthly tasks; quarterly tasks; and annual tasks.

Daily tasks

A tax accountant’s daily tasks involve collecting and processing various invoices or documents that arise to serve as a basis for accounting and declaration. Invoice/document information must be synchronized by the tax accountant on the company’s system for management. 

Here are some of a tax accountant’s daily tasks: 

• Collect and store output and input invoices.
• Check and process invoices in accordance with state and company regulations.
• Pay any arising taxes. (To avoid penalties for late or overdue payments)
• Record bank transactions such as received funds and transferred funds. 
• Deposit money into the State budget and record fund-related transactions based on payment and receipt vouchers.

Monthly tasks

At the beginning or end of the month, the tax accountant must ensure all tax reports are submitted before the 20th of the following month. A tax accountant’s monthly tasks include: 

• Prepare monthly value-added tax (VAT) declarations for businesses that declare VAT on a monthly basis. (Condition: revenue over 50 million VND)
• Prepare monthly personal income tax (PIT) declarations for businesses that declare taxes on a monthly basis. (Condition: revenue over 50 million VND)
• Prepare other relevant tax declarations (if any).
• Prepare a monthly report on invoice usage. (Only applicable to businesses established for less than 12 months)

• Record transactions in the accounting ledger (journal entries) for the allocation of tools, instruments, and depreciation of fixed assets.
• Balance the figures on the balance sheet and devise handling plans; avoid letting work pile up at the end of the year.

Quarterly tasks

For each quarter of the year, the tax accounting department must perform the following tasks: 

• Prepare quarterly VAT declarations. (For newly established businesses and those with revenue under 50 billion VND)
• Prepare quarterly Personal Income Tax declarations.
• Report on the company’s invoice usage (invoices used, invoices damaged).

Annual tasks

At the end of each year, a tax accountant’s workload is typically heavy and plays a crucial role. It includes: 

• Prepare the annual financial statements (Balance Sheet, Income Statement, Cash Flow Statement, Notes to the Financial Statements, Trial Balance.)
• Prepare the Q4 tax report.
• Prepare the annual PIT finalization report.
• Prepare the annual corporate income tax (CIT) finalization report.
• Print various ledgers and books to serve tax finalization and audits. (General ledger for all accounts; Cash book; Bank deposit book; Subsidiary ledgers for all accounts; Fixed asset depreciation schedule; Receipt and payment vouchers; etc.)

>> Read more: 5 most suitable accounting department organizational models for businesses

3. Requirements to become a tax accountant

To become a tax accountant, one must fully meet the requirements for expertise, skills, work attitude, and soft skills.

3.1. Regarding expertise

The work of a tax accountant primarily revolves around knowledge of taxes and laws. Therefore, to become a tax accountant, you must have a firm grasp of the following knowledge:

• Knowledge of Tax Law: Corporate tax law, personal income tax law, value-added tax (VAT) law, import and export tax law, and other tax regulations depending on the country or territory.
• Accounting knowledge: A tax accountant needs to have a solid understanding of accounting principles and procedures.
• Knowledge of tax systems and deductions: Tax systems, types of taxes, deductions, and tax benefits are information that tax accountants frequently work with. Therefore, a tax accountant must understand and classify them correctly to process data accurately.

Additionally, when businesses recruit for tax accountant positions, the recruitment criteria regarding degrees and certifications are also emphasized. Therefore, one of the most basic requirements to become a tax accountant is to have graduated from a university or college with a major in Accounting, Finance, or a related field.

3.2. Regarding skills

Similar to many other job positions, a tax accountant also needs certain skills, such as:

Professional skills

• Calculation and analysis skills, such as preparing financial statements, tax reports, etc.
• Office skills
• Skills in using accounting software such as MS Excel, 1Office, Word, etc.

Soft skills

• Time management skills
• Communication skills
• Teamwork skills
• Problem-solving skills

3.3. Other related qualities

Not everyone can be a skilled and excellent tax accountant. Due to the specific nature of the work environment, tax accountants must frequently work with numbers. Therefore, people in this role often possess specific qualities such as:

• Meticulous and detail-oriented
• Honest, accurate
• Quick with numbers
• Calm
• High level of concentration

4. Notes and common mistakes in tax accounting

Tax accountants must ensure their work is accurate and complies with legal and company regulations. Even a small mistake can have a serious impact on the business.

To help you avoid errors in tax accounting, 1Office has compiled common mistakes to avoid and important notes to keep in mind.

Notes for tax accounting

– Regularly update tax laws: Government tax regulations change over time. Therefore, tax accountants must stay updated and understand the latest tax information as stipulated by the state. This ensures the accuracy of the tax declaration process. Failure to regularly update tax knowledge can expose the business to risks of back taxes, penalties, or difficulties in maintaining the accuracy of the tax accounting process.

– Secure information: A company’s tax data is critical information that must be kept confidential. This helps the business avoid risks of information misuse or tax fraud. Therefore, tax accountants must ensure strict data security.

– Consider tax deductions: Tax accountants must understand and utilize deductions, exemptions, and other related policies to legally minimize the tax payable. This is one of the most common requirements from business owners for the accounting department to optimize the company’s financial resources.

– Unify information within the company: Tax accounting is not an isolated function. Tax accountants must collaborate with other departments to synchronize information and process financial data.

Common mistakes in tax accounting

– Errors in tax declaration:

• Missing important criteria in the monthly VAT declaration can lead to penalties and difficulties in complying with tax declaration regulations.
• Confusion and incorrect information entered between lines, leading to inaccuracies in the declaration content.
• Combining revenue and output tax from multiple tax rates into a single line.
• Failing to declare the 3% deduction for goods not subject to VAT or purchased not for resale.
• Not including the input VAT on imported goods as per Customs notifications.

– Errors when purchasing invoices:

• Missing important information such as the letter of introduction number, date, recipient’s name, and the title of the legal representative.
• Not clearly stating the entity that must purchase invoices from the tax authority.

– Errors when exporting goods or providing services:

• Not issuing VAT invoices for exported goods.
• Not issuing invoices for revenue from consigned export goods.
• Not clearly stating the VAT rate.
• Not preparing periodic reports on invoice usage.

– Errors when accountants prepare sales and purchase invoice summaries:

• Incomplete columns as required by regulations.
• Incorrect format when entering the accounting date.
• Failing to list canceled invoices in the summary, leading to duplicate information in the summary.
• Not preparing a separate summary for goods and services not subject to VAT.

Above is all the information about tax accounting compiled by 1Office. We hope this article helps you better understand the work of a tax accountant and how to become one. We wish you success!