Accounting Tax Due Diligence is a comprehensive examination of the different types of taxes that may be imposed upon a particular business, as well as the various taxing jurisdictions in which it may have sufficient connection to be subject to such taxes. Most frequently employed on the buy side of a transaction, the goal of tax due diligence is to uncover significant potential tax exposures. Unlike annual income tax return preparation, tax due diligence is less concerned with relatively small missed items or miscalculations (for example, should a disallowed meals and entertainment deduction have been $10,000 instead of $5,000).

While the threshold for significance can change with the value of the deal (or the target, if the deal is for less than 100% of the equity), an amount that would affect a buyer’s negotiations or decision to proceed with a transaction is typically higher than that which would concern a tax return preparer.