Tax Due Diligence Playbook

Access DealRoom's list of initial tax diligence requests to identify tax-related risks before acquiring a company.

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Start Due Diligence With DealRoom
Start Integration With DealRoom

Tax Due Diligence Playbook

Access DealRoom's list of initial tax diligence requests to identify tax-related risks before acquiring a company.

Download Template
Start Due Diligence With DealRoom
Start Integration With DealRoom

What are the benefits of using this template?

Excel Export/Import

Export this template to Excel with just one click. Also, Import your Excel spreadsheet easily - turn it into a nice dealroom.net board.

Integrated with Data Room

The tasks tracker is integrated with the virtual data room, so you can start collecting documents right away.

Easy Tracking

Track your projects progress from start to finish, know if a task is stuck or behind schedule.

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What Tasks does the 

Tax Due Diligence Playbook

 Include

General Information

  • All available audit information Information related to any return or report filed by the company for the last five fiscal years
  • Information related to any pending audits or administrative disputes related to taxes for open periods
  • Tax agreements and data crucial for tax reports (Allocation agreements)
  • Tax agreements and data crucial for tax reports (Sharing agreements)
  • Tax agreements and data crucial for tax reports (Preparation agreements which involve the company)
  • Tax agreements and data crucial for tax reports (Agreements which extend the period for assessment or collection for all types of taxes)

Federal Taxing

  • Consider if the purchase of this company would change the entity type
  • Thoroughly check if the prior transactions of the target company were executed properly
  • Determine if all returns have been filed on time and, if not, if extensions have been requested on time
  • Based on the statute of limitations, determine open tax yearsSee for yourself which exact methods this company was using for accounting
  • Request to view the IRS acknowledgment letterExamine tax credits and other carryforwards
  • Collect all relevant federal tax documents, such as IRS examinations and audits, audits in progress, notices, and other correspondences

State and Local Taxing

  • Check which tax returns and forms need to be used in each state the target company does business
  • Get a list of products and services sold in each state
  • Find out if the activities performed in the state rise above the minimum requirements
  • Examine state income tax filings and withholding  
  • Consider state sales and use tax and review for all open years
  • Examine business property tax items for at least the last 3 yearsReview tax payments to be sure that they are being paid timely
  • Review property tax statements for the last three years
  • Consider unclaimed property tax filings and get a copy of the files for the last few years

Compensation Taxes

  • Obtain a full review for payroll tax filings, payments, and withholding
  • Check with the federal payroll register for proper calculation of payroll
  • Inquire about payroll tax liabilities as well as the ones that remain unpaid  after 30 days
  • Determine which types of retirement and benefit plans are offered by the company, as well as discrimination testing and results of compliance
  • Examine stock option plans

Possible International Taxing

  • Check if there is a permanent establishment in foreign jurisdictions for this company
  • If there is a permanent establishment in foreign jurisdictions, check to see if all the returns are paid on time and in compliance with the regulations in a foreign jurisdiction
  • Consider foreign tax withholding and transfer of pricing
  • Collect data about recent returns and audits in progress, as well as correspondences from foreign tax jurisdictions

FAQ

What Is Due Diligence?

Due diligence is a critical aspect of any deal that begins very early in the process and can continue right up until closing. During due diligence, the potential buyer asks questions and requests documentation from the seller that helps the buyer understand the target company and its business. These requests are usually general to start and become more specific as the buyer develops a greater understanding of the target. Buyers use the information provided by the seller to evaluate the opportunities and risks associated with the potential transaction. It is important for sellers to stay organized throughout the process. Buyers often submit thorough, detailed request lists that require input from numerous members of the seller’s deal team.

What is a due diligence checklist?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

What Questions Does the Master Due Diligence Questionnaire Include?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

Key considerations when using our m&a due diligence template

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select a Master Due Diligence Template while creating a new room
  • Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

Can I change requests in this checklist or add new?

Every M&A process is different. Downloaders are urged to make these checklists their own by changing the providing information to better fit their needs.

Does this questionnaire provide all the necessary integration information?

This checklist was created by and for M&A professionals. It includes a comprehensive starting point for the integration process. However, every deal is different and may require additional requirements and tasks.

How to use this template with DealRoom?

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select an Integration Template while creating a new workspace
  • Start planning, assigning, adding to, and completing integration tasks. The Requests tab is automatically populated with the tasks from the integration template.

Key considerations when using our m&a due diligence template

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select a Master Due Diligence Template while creating a new room
  • Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

Tax Due Diligence Playbook

Access DealRoom's list of initial tax diligence requests to identify tax-related risks before acquiring a company.

Tax due diligence can be challenging

In order to execute M&A transactions in today’s environment, organizations need to understand the right questions to ask, all while preventing hundreds of diligence-related emails, back-and-forth Excel sheets, and information silos.

This is why we built DealRoom. Our due diligence solution will transform your tax diligence process into one efficient workflow.

Start trial with this playbook

Prepare for your tax due diligence

DealRoom’s tax due diligence template is designed to help teams have an efficient due diligence process from the beginning. By providing your team with a pre-made professional diligence checklist, you can get a jump start on fulfilling diligence requests.

This template offers you a comprehensive examination of different types of taxes that could be set upon a certain business, as well as tax jurisdictions and other crucial taxing items a company should know about. And when you use a diligence tracker inside DealRoom, everything will be in one centralized space.

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  • All available audit information Information related to any return or report filed by the company for the last five fiscal years
  • Information related to any pending audits or administrative disputes related to taxes for open periods
  • Tax agreements and data crucial for tax reports (Allocation agreements)
  • Tax agreements and data crucial for tax reports (Sharing agreements)
  • Tax agreements and data crucial for tax reports (Preparation agreements which involve the company)
  • Tax agreements and data crucial for tax reports (Agreements which extend the period for assessment or collection for all types of taxes)
  • Consider if the purchase of this company would change the entity type
  • Thoroughly check if the prior transactions of the target company were executed properly
  • Determine if all returns have been filed on time and, if not, if extensions have been requested on time
  • Based on the statute of limitations, determine open tax yearsSee for yourself which exact methods this company was using for accounting
  • Request to view the IRS acknowledgment letterExamine tax credits and other carryforwards
  • Collect all relevant federal tax documents, such as IRS examinations and audits, audits in progress, notices, and other correspondences
  • Check which tax returns and forms need to be used in each state the target company does business
  • Get a list of products and services sold in each state
  • Find out if the activities performed in the state rise above the minimum requirements
  • Examine state income tax filings and withholding  
  • Consider state sales and use tax and review for all open years
  • Examine business property tax items for at least the last 3 yearsReview tax payments to be sure that they are being paid timely
  • Review property tax statements for the last three years
  • Consider unclaimed property tax filings and get a copy of the files for the last few years
  • Obtain a full review for payroll tax filings, payments, and withholding
  • Check with the federal payroll register for proper calculation of payroll
  • Inquire about payroll tax liabilities as well as the ones that remain unpaid  after 30 days
  • Determine which types of retirement and benefit plans are offered by the company, as well as discrimination testing and results of compliance
  • Examine stock option plans
  • Check if there is a permanent establishment in foreign jurisdictions for this company
  • If there is a permanent establishment in foreign jurisdictions, check to see if all the returns are paid on time and in compliance with the regulations in a foreign jurisdiction
  • Consider foreign tax withholding and transfer of pricing
  • Collect data about recent returns and audits in progress, as well as correspondences from foreign tax jurisdictions

General Information

  • All available audit information Information related to any return or report filed by the company for the last five fiscal years
  • Information related to any pending audits or administrative disputes related to taxes for open periods
  • Tax agreements and data crucial for tax reports (Allocation agreements)
  • Tax agreements and data crucial for tax reports (Sharing agreements)
  • Tax agreements and data crucial for tax reports (Preparation agreements which involve the company)
  • Tax agreements and data crucial for tax reports (Agreements which extend the period for assessment or collection for all types of taxes)

Federal Taxing

  • Consider if the purchase of this company would change the entity type
  • Thoroughly check if the prior transactions of the target company were executed properly
  • Determine if all returns have been filed on time and, if not, if extensions have been requested on time
  • Based on the statute of limitations, determine open tax yearsSee for yourself which exact methods this company was using for accounting
  • Request to view the IRS acknowledgment letterExamine tax credits and other carryforwards
  • Collect all relevant federal tax documents, such as IRS examinations and audits, audits in progress, notices, and other correspondences

State and Local Taxing

  • Check which tax returns and forms need to be used in each state the target company does business
  • Get a list of products and services sold in each state
  • Find out if the activities performed in the state rise above the minimum requirements
  • Examine state income tax filings and withholding  
  • Consider state sales and use tax and review for all open years
  • Examine business property tax items for at least the last 3 yearsReview tax payments to be sure that they are being paid timely
  • Review property tax statements for the last three years
  • Consider unclaimed property tax filings and get a copy of the files for the last few years

Compensation Taxes

  • Obtain a full review for payroll tax filings, payments, and withholding
  • Check with the federal payroll register for proper calculation of payroll
  • Inquire about payroll tax liabilities as well as the ones that remain unpaid  after 30 days
  • Determine which types of retirement and benefit plans are offered by the company, as well as discrimination testing and results of compliance
  • Examine stock option plans

Possible International Taxing

  • Check if there is a permanent establishment in foreign jurisdictions for this company
  • If there is a permanent establishment in foreign jurisdictions, check to see if all the returns are paid on time and in compliance with the regulations in a foreign jurisdiction
  • Consider foreign tax withholding and transfer of pricing
  • Collect data about recent returns and audits in progress, as well as correspondences from foreign tax jurisdictions

How DealRoom can help you execute due diligence

By using our master due diligence template, alongside DealRoom’s M&A lifecycle management software, you can create a smooth diligence process.

How DealRoom can help you execute integration

By using our integration template, alongside DealRoom's M&A lifecycle management software, you can create a smooth integration process

With this solution you’ll receive:

Professional diligence template

With requests that are specific to your transaction type. Whether you conduct sell-side or buy-side transactions, our platform allows you to add new requests as they pop up, track progress, collaborate and more.

A built-in data room

Allowing you to link corresponding documents to the diligence requests and keep all the information safe. Organize and manage your files and documents with easy drag & drop upload, 4-levels permissions, a built-in viewer, and smart notifications.

Project management capabilities

That enable your team to work together and set priorities during the diligence process. You can also invite other parties and client into the platform, set permissions, access and answer new coming requests.

Collaboration tools

To eliminate long email threads. Team members can add comments and specifically tag other users on requests to ask questions or give awareness.

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