As tax professionals brace for another round of possible major tax law changes, it is important to understand how these coming changes could affect the data, processes, and technology they use. The Tax Cuts and Jobs Act of 2017 (TCJA) made significant changes to the way U.S. multinationals were taxed and created challenges when incorporating these changes into calculation engines and supporting documentation. The lessons learned from the TCJA on how organizations can best position themselves for possible rate increases should be top of mind for tax professionals. Aligning people, process, and technology in the most efficient manner according to an organization’s specific facts and circumstances will put it in a position to successfully navigate the possible tax changes as well as any resource and technology changes.
Following are five areas to focus on to prepare and be in the best position to tackle any upcoming tax law changes.
1. Learn from prior challenges
To fully prepare for any coming tax change, first understand the challenges faced during previous tax law changes. For example, look to the TCJA, which was a significant change in how tax was computed and reported for income tax provision and compliance purposes. Consider the following as you think about how your business would incorporate future tax law changes:
- Is your current process optimized and efficient?
- Where are the challenges in the current process?
- Are you using systems and ancillary tools to mitigate risk and maximize efficiency?
- How effective are your workbooks or solutions at handling post or late entries?
- Have manual or outside calculations been analyzed for automation?
- Are there new technologies that should be incorporated to facilitate importing, exporting, and reporting?
2. Automate processes
The exhibit that follows shows an overview of the direct tax process along with the benefits of using automation. Having a highly automated process and detailed process map makes it possible for tax professionals to use the tools already in place while isolating the pieces that will need to be optimized for new tax reform requirements. Automating takes the guesswork out of what needs to be accomplished and allows users to focus on what needs to change within the process as well as within supporting systems and solutions.
Identifying how efficient the process is throughout the tax life cycle and how easy it is to change and manage will dictate how prepared the organization is for future changes. Deeply understanding the current state will help provide consistency from period to period while reducing risk throughout the process.