Tax Automation: The Future of Corporate Tax Planning and Reporting

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In the world of business, automation is making big waves. What once took humans hours now takes a matter of minutes, meaning that we can get more done with minimal labor. However, automation, especially when partnered with taxation, raises more than a few eyebrows. Legal concerns, as well as concerns about worker’s rights have been raised. Nevertheless, it seems that businesses, corporations in particular, are going to need to learn the ins and outs of tax automation sooner, rather than later.

The Need for Tax Automation

Because it’s so hard to stay on top of every single sales tax rate and rule, especially because they are subject to change, it’s almost essential to employ tax automation software nowadays. Diane L. Yetter writing for the Sales Tax Institute states, that, “by various estimates, there are between 7,500 and 14,000 different authorities that impose a sales tax in the U.S. alone,” which include counties, cities, transit, school, and police among others. After realizing this statistic, she asks a pertinent questions of any corporate lead:

“Think of all the different people that are involved in making sales and use tax decisions within your company. Are you confident that each of these individuals is making the right decision when it comes to sales and use tax?”1

When put like this, the need for tax automation to increase accuracy and reduce errors seems self-evident.

According to the QAD Blog, companies that use certain tax automation software reduced time spent managing sales tax by 50 percent — some even saw bigger results, reducing tasks that traditionally took 20 hours or more to complete to less than one hour. Additionally, while companies traditionally take 37 days to prepare for and complete an audit, those that turn to automation could see that reduced to 8 days, while passing audits without penalty 50 percent more often than companies that don’t automate.2

A Cloud-Based Solution

Even though the future of taxation is likely automated, that doesn’t negate human involvement by any means. Tax professionals must have a solid understand of the software solutions they employ, lest they run afoul of any regulations or guidelines.

Most transaction-based tax automation software is now housed in the cloud. This allows for multiple users to connect at multiple times, unparalleled customization, as well as the ability to run on almost any systems. This will require configuration.

To connect properly to a tax-software solution, you’ll need to make sure there’s an effective connection stemming from your enterprise resource planning (ERP) or accounting software. This is essential for translating all of the right data at the right times, including addressed, product-specific SKUs, shipping terms, or even the application of customer-based exemptions. When making connections from your systems to the cloud, make sure that these are set up properly. This is an IT/Programming obligation as well as an obligation to any informed tax professional.

Beyond calculating taxes accurately for any given sale, your tax software should also be able to produce and provide effective reports, as well as to file returns in an automated fashion.

Selecting the Right Tax Automation Software For You

If you haven’t already started looking at tax automation software, there’s no better time than now — and when it comes to selecting your tax automation software, you want to get it right the first time. As such, you’ll want to keep a few things in mind.

First, realize that there are different types of software to choose from. Even though most solutions are cloud-based (especially corporate and enterprise solutions), your company might want to go with something different. It’s important to figure out what’s right for your company, and then head in that direction. For example, a standard, plug-and-play type of product might be best for your existing systems. On the other hand, you might work in a unique industry that doesn’t have a popular third party solution and interface, so a custom build bit of software might be best for you.

When selecting tax automation software it’s also important to perform a comprehensive analysis of both your cross-departmental in-house needs (which include IT and programming as well as specific needs rising from customer service, sales, accounts receivable, etc.) as well as an analysis of the vendors. Once you ensure that the needs you’ve identified can be fulfilled by a prospective vendor, usually by having them demonstrate their solution using data similar to yours, only then should you move forward with a solution.

Last but not least, if you’re using multiple solutions from multiple vendors, make sure that they’re all going to interface together correctly. It’s your responsibility entirely — not theirs — to make sure that your systems all work in symphony.

At Villanova University’s Graduate Tax Program, students who are pursuing a Master of Taxation (MT) degree or a Master of Laws (LLM) in Taxation are being taught to prepare for automation and to employ the correct systems once they’re participating in the business side of economy. The future of taxation is less complicated when you’re in-the-know and up to date. Make sure that you’re not being left behind.

Related Articles:

The Digital Economy and Tax Law: How Technology Affects Regulation

In-Demand Careers for Tax Law Experts

The Tax Technology Gap: Future Issues to Watch



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