Tax AccountantInterview Questions
A tax accountant’s primary job function is to collect tax-related information and report it to the taxation authorities. They must make sure it reaches authorities at the local, county, state, and federal levels in a timely manner.
A tax accountant will also advise the company’s management of tax impact on corporate strategies. This advising may include preparing tax provision schedules, recommending tax strategies for federal, state, and local taxation issues, and maintaining compliance with state and government regulations.
Tax accountant responsibilities may include:
- Filling individual or business tax returns
- Calculating business earnings
- Providing consultation on tax impacts
- Preparing tax provision schedules
- Helping clients handle external audits
Tax accountants are responsible for saving clients' time and money by handling their tax accounts for them. A skilled tax accountant will need to be able to:
- Maintain a system to keep track of financial statements
- Stay on top of changing trends within the industry
- Manage their time in order to stay on top of all of their duties
- Have a keen eye for detail to catch discrepancies within the business
- Conduct research and analyze data to provide accurate financial feedback
- Handle high volumes of work during tax season
Entry level positions within the field typically require at least a bachelor’s degree and CPA certification. Because competition is fierce within the field, it is recommended that job seekers have a master’s degree and a record of prior experience within the industry.
Salaries for tax accountants range between $75K to $150K with the median being $90K.
Factors impacting a tax accountant's salary include:
- Degrees (bachelor's, master's)
- Years of Experience
- Managerial Responsibilities
- Skills and Certifications (corporate vs. individual tax returns; accounting certification - CPA, CMA, etc.)
- Type of Organization You Work For (company or in-house, CPA firm, self-employed/independent contractor)
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Tax Accountant Interview Questions
Question: Can you explain the difference between tax accounting, auditing, and forensic accounting?
Explanation: The purpose of this question is to determine your familiarity with various accounting roles. The interviewer will use this qualifying question early in the interview to help set the stage, confirm your qualifications, and as a way to move the interview forward. The best way to answer this is directly and succinctly. Expect some follow-up questions about tax accounting.
Example: “These are the three main branches of accounting. Auditing is reviewing the organization's accounting records as well as their policies, processes, and operations. The purpose of an audit is to ensure the organization is operating in conformance to applicable regulations and to identify areas that can be improved. Forensic accounting is the act of reviewing an operation’s books and other documentation to identify the sources of accounting errors for both legal and operational purposes. Tax accounting is only focused on the financial records of a company, the goal of which is to prepare the documents needed to file required tax returns and other financial documents such as quarterly and annual reports. A secondary purpose is to help the organization reduce its tax liabilities.”
Question: How would you go about forecasting an organization’s tax liabilities for the upcoming fiscal year?
Explanation: This is an operational question the interviewer uses to test your skills and knowledge to confirm your qualifications for the position you are applying for. You are likely to be asked many questions of this type during an interview. You can answer this question by providing an overview of the process you would use, citing any specific issues which may impact the process.
Example: “Forecasting is an inexact science due to the variable nature of any business. However, you can develop a reasonable estimate of the company’s tax liability using a well-defined process. The forecasts can then be updated as the company moves through the year and more exact data is available. The forecasting process begins with gathering the historical data for the current year. You then make a set of assumptions about changes in operations, revenue, costs, and other factors that could impact the company’s financial performance in the upcoming year. The next consideration is any changes in the tax code or accounting procedures due to be implemented during the forecasting period. Once all of this information has been collected, you can use the current year’s performance, adjust the financial statements as indicated by the assumptions and other changes, and prepare a pro forma income statement. This would be used to forecast the company’s upcoming tax liabilities and quarterly payment estimates.”
Question: What is a deferred tax liability, and how do you account for it?
Explanation: The interviewer is asking you a straight-forward technical question meant to test your accounting knowledge. You have probably seen this question on school exams as well as your CPA test. Answer technical questions the same way you did on your exams with a definition of the term and an explanation of how to address it using GAAP standards and the local tax code.
Example: “A deferred tax liability is a tax that has been assessed for the current reporting period but hasn’t been recorded as being paid. This is typically the result of a timing issue in which the liability was realized in one period but doesn’t need to be paid until a subsequent period. An example of this is an installment sale. Deferred taxes are recorded as liabilities in the owner’s equity account.”
Question: Can you explain why it is important for businesses to maintain tax records for a minimum of seven years?
Explanation: This is another operational question an interviewer may ask to confirm your qualifications for the position. You can use this as an opportunity to demonstrate your advanced knowledge of tax accounting and to show the interviewer how your expertise can benefit the organization. You do this by answering the question and recommending additional steps to optimize the record retention process.
Example: “The IRS requires businesses to be able to present tax records and supporting documentation for up to seven prior years in the event of an audit. This makes it mandatory for businesses to retain their tax records for this long. However, I recommend retaining records for ten years. Not only will this protect the business if the IRS audits them, but it also makes the information available for research. Tax accountants can use the information to review prior-year tax returns to discover opportunities to reduce an organization’s tax liabilities and file an amended return. Prior years' returns will also help in estimating future taxes and identifying trends which the organization can use to create plans to save on their taxes going forward.”
Question: How would you assist a client who has overdue tax payments?
Explanation: This is a situational question that helps the interviewer learn about your expertise in tax accounting to determine how you would handle a difficult situation. While many individual tax filers experience overdue taxes, it is common in the business community as well. The best approach to resolving difficult or negative situations is head-on, using your skills to resolve the issue as quickly and efficiently as possible. Provide an answer that demonstrates this.
Example: “Unfortunately, organizations sometimes encounter situations where they owe overdue tax payments. These result from incorrect filings, changes in the tax code, or IRS audits. My experience has taught me that the best way to address this issue is to work with the organization and the IRS to put together a plan to bring the tax payments current. This involves confirming the liability, determining the legal issues such as tax liens, negotiating with the IRS to avoid penalties and additional costs, and creating a payment plan which will satisfy the IRS and is manageable for the organization.”
Question: Our industry is fast-paced and evolves quickly. The tax code related to what we do also seems to be updated each year. How do you plan to stay abreast of these changes to be able to both minimize the organization’s tax bills and ensure our financial filings keep us in compliance with the regulatory agencies?
Explanation: An interviewer will ask this type of question to determine if you spend time maintaining your current knowledge of the tax code and tax industry. Everyone should have a professional development plan, and the interviewer expects you to be able to describe yours with specific items addressing their question.
Example: “As a CPA, I am required to earn ongoing continuing education credits to maintain my license. The governing agency prescribes some of this, but much of it is optional. Each year I create a CE roadmap that will ensure I maintain my accreditation, but more importantly, it will keep me current with changes in the tax code and industry practices. I also take time to learn more about the industry I work in by reading publications and journals, attending industry conferences, following key influencers, and joining industry groups and organizations. Staying current with developments in the industry allows me to identify opportunities for tax savings.”
Question: Can you explain long-term capital gains, and how is it different from short-term capital gains?
Explanation: This is a technical interview question that directly tests your knowledge of standard accounting practices. The best way to respond to a technical question is directly and succinctly with a clear definition. In some cases, you may want to provide a brief example to illustrate your answer. Be prepared for the interviewer to follow up with a related question or to request more details.
Example: “Capital gains are the profits earned when organizations sell an asset such as property, equipment, or an investment. The gain is calculated by deducting the original cost from the sale price less any adjustments for other costs related to the asset. The difference between long-term capital gains and short-term ones is the period for which the asset was held. The period varies depending on the asset class.”
Question: Can you define alternative minimum tax (AMT) and describe how it is used?
Explanation: This is another technical question. The key to questions asking for a definition is to define the term as you understand it. This is followed by either an example or a short description of how the term or concept is used in your profession. Again, being concise is important because the more you add to your answer, the more likely you are to create confusion or misstate the definition.
Example: “The alternative minimum tax applies to wealthy individuals who may be able to avoid paying taxes due to the use of a large number of deductions from their income. The AMT sets a minimum tax liability indexed to higher income levels, regardless of the deductions the taxpayer claims even though they are legitimate.”
Question: What is the Streamlined Sales and Use Tax Agreement?
Explanation: While this is another technical interview question, it is a rather obscure one. Many but not all tax accountants may be familiar with this tax-related item. This question illustrates the concept of being honest and stating that you don’t know the answer but know how to find it. Since there is a large volume of items in the federal and individual state tax codes, you can’t be expected to know them all. If you can’t answer the question, admit this and describe how you would locate the information or deal with the issue.
By the way, the Streamlined Sales and Use Tax Agreement is a plan introduced by state governors to simplify the collection of sales tax which is the second largest source of income behind either personal or property taxes for most states.
Example: “I’ll be honest, although I’ve heard of the Streamlined Sales and Use Tax Agreement, I can’t recall to what it refers exactly. As you are probably aware, the tax code is a large and complex set of laws and varies between the federal government and each of the states. When I encounter something I’m not familiar with, I research it in the appropriate tax code rather than guess or make an assumption.”
Question: What is inter-company reconciliation?
Explanation: Again, this is a technical question that demands a direct and concise answer. As a tax accountant, you can expect more technical questions than general or behavioral questions. A good way to prepare for an interview is to learn as much about the organization as possible by researching them, their industry, and the type of business they practice. This should give you an idea of what taxes they are subject to. You can then refresh your understanding of the tax practices related to their operations since these are the items they are most interested in and about which they are likely to question you.
Example: “Companies are only required to file a consolidated tax return for the parent company. However, the organization may consist of individual subsidiaries. Completing an inter-company reconciliation enables organizations to assign transactions to each subsidiary. This creates a more accurate representation of the subsidiary’s financial position and performance and avoids duplicate recording of transactions.”
Additional Tax Accountant Interview Questions
What information would you use to create a forecasting report for next year’s tax returns?
What accounting software do you have knowledge of?
You find out your client has to pay a fine because you weren’t aware of a change in regulation. How would you handle this?
What process do you use to create monthly, quarterly, and annual reports?
How do you stay on top of regulatory changes within the industry?
What is a B-Notice? Who should receive a B-Notice?
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