How to prepare for tax changes amidst uncertainty

Welcome to this edition of Talking Tax, where each month I explore a major trend or topic in corporate taxation and share advice on how to put tax strategy at the heart of decision making. Be sure to subscribe, so you’ll get the latest edition directly in your inbox.

Have a question about your company’s tax strategy? Get in touch with me at [email protected].

Now, let’s Talk Tax.

It’s no secret that President Biden has many big tax changes on his agenda. But with the Democrats having only a slim majority in Congress, it remains to be seen what the final policies will be and how they will impact business. Even outside of the Biden administration, the winds of change are blowing when it comes to tax. At the state level, changes to employment taxes may be coming as many workforces evolve to a hybrid in-person and remote model. And at the international level, a digital services tax and a corporate minimum tax may become a reality once the OECD meets this summer.

According to our 2021 Tax Outlook Survey, one in four tax executives said their top personal challenge in 2021 is keeping up with regulatory and compliance challenges. And with 55% of tax executives saying their organization had a tax dispute in the past year, it is now more crucial than ever to understand and plan for regulatory changes.

Planning for the future might feel overwhelming at this stage with so many unknowns, but it doesn’t have to be. The right technology, data, people and processes can take some of the anxiety out of tax planning and prepare your business for change.

To start, make sure you’re leveraging the right technology that is capable of analyzing vast amounts of data and building different scenarios for your organization. This is a key way to not only be prepared for changing regulations, no matter what the outcome, but it also positions tax as a strategic function of the business that is capable of driving business decisions. With the right modeling, you can see how to strategize for multiple possible futures. Forecasts then need to be adjusted as the situation evolves. For example, as we head into a post-pandemic future, some employees may continue to work remotely. States are examining how they tax out-of-state employees working for in-state organizations. How will these changes and a patchwork of state regulations affect your organization? Are the benefits of allowing out-of-state remote work worth the potential tax impacts? These are the types of strategic conversations tax professionals can be driving with their larger organization, but they’re only able to do so with the right models, effective communication and scenario planning.

But of course, the best modeling programs won’t be of much use if your data is not accurate. Ensure your organization is working with the correct data by automating your data capture. Manual data entry opens the door to human error, resulting in corrupted data that generates poor insights. Collecting data manually is also very costly. In addition, it’s crucial you’re breaking down data silos both within your organization and from suppliers and partners to ensure accuracy, availability and flow of data between multiple departments.

As organizations automate data capture and introduce new modeling technology, it requires your people—both inside your tax department and in your organization at large—to understand the goals of tax transformation. Tax professionals will need to understand how to use new modeling programs and best practices for data accuracy and management and will need to buy into the idea that these advances are freeing up time for more high-level, strategic work. And the organization at large will need to see that this transformation is enabling the tax department to inform strategic business decisions. It is no longer a cost center but a cost mitigator.

Finally, to prepare for changes on the horizon, tax professionals will need more time to spend on analysis, planning and high-level work, but they’ll only find that time by improving process efficiency. Check on the status of your current processes. Is your business working in department and information silos? And does your tax department spend most of the time racing to complete the record-to-report cycle before filing deadlines occur? By optimizing processes, you can enable tax professionals to spend the bulk of their time on business-critical objectives rather than administrative and routine tasks. This includes having more time to scenario plan, create models, and work with other departments in developing business strategies to respond to regulatory uncertainty and changes.

With the right technology, data, people and processes, your organization can be prepared for whichever outcome comes to pass on state, federal and international tax regulations.

To learn more about how your business can prepare for upcoming tax changes, join our Tax Strategist Webinar series. The first session will be on June 2nd and will cover tax considerations to begin implementing now to effectively lower your business’s total tax liability.

We’ll also be hosting a Tax Innovation Webinar series. Our upcoming session on June 8th will delve into how your organization can accelerate the shift to a digital tax department.

You can also learn more about tax transformation on our Tax Resource Hub.