How To Write An Explanation For A Loss

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How To Write An Explanation For A Loss
How To Write An Explanation For A Loss

Video: How To Write An Explanation For A Loss

Video: How To Write An Explanation For A Loss
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Enterprises that, according to the results of the reporting period, showed a loss in the tax return, it is imperative to write an explanation justifying the unprofitableness of financial and economic activities. Otherwise, the tax office may decide to conduct an on-site audit or (in extreme cases) to liquidate the company.

How to write an explanation for a loss
How to write an explanation for a loss

Instructions

Step 1

Analyze the financial and economic activities of the company for the past reporting period. Check out the items of income and expenses that have been accepted for tax accounting. Determine the reason for the unprofitability of the company, which will be recognized as respectable by the tax office.

Step 2

Justify the loss by the fact that the company is new and needs to take certain measures for development. As a rule, this reason is a strong justification for the excess of expenses over income. Be sure to clarify that the company's activities are in line with the established business plan; indicate the reporting period in which the profit is expected.

Step 3

Inform that the company has decided to master new production or to reconstruct fixed assets. As a result, sales volumes temporarily decreased and costs increased. If the company was previously listed in the tax inspectorate as a stable operating company, then such an explanation will be accepted with understanding.

Step 4

Indicate that in this reporting period, the company has lost an important counterparty, which provided the company with most of the profits. Inform that you have taken steps to find new clients who could increase the profitability of the company.

Step 5

Refer to increased competitiveness by temporarily lowering product prices. This factor can cause the excess of expenses over income and the formation of a loss, but will be perceived by the tax inspectorate as a good reason. At the same time, it is necessary to report on the achieved or planned results that will lead to an increase in profits in future reporting periods.

Step 6

Write an explanation addressed to the head of the territorial tax office. Give a valid reason for the loss and indicate the items of income and expenses that influenced this result. If a decision is made that the unprofitableness is unreasonable, then the tax office may decide on an on-site audit.

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