The Tax Cuts and Jobs Act (TCJA) added enormous complexity to the tax code, especially international taxation. In addition to creating entirely new calculations for GILTI, FDII and BEAT, TCJA introduced changes to existing calculations for other items such as Interest Limitations, Earnings and Profits, and Subpart F.
TCJA was drafted quickly with little guidance and implemented almost immediately. In fact, almost three years into its implementation, we are still receiving regulations and final guidance—some of which can be applied retroactively and some of which is yet to come. So, the work we’ve already done may need to be recalculated (ugh).
In addition, just as we were implementing TCJA changes, the IRS drastically expanded reporting requirements for Forms 5471 and 1118, creating the need to acquire and review more data than ever before.
And it looks like these known changes could be eclipsed by what’s on the horizon. Additional economic stimulus packages, proposed changes from the OECD, and additional tax code changes based on state and federal election cycles all loom large. The only thing we know for sure: we must be prepared to adopt additional modifications quickly.
But never fear. As the tax world gets harder, tax technology makes your world easier. It makes the difference between struggling with change and taking change in stride. Read on for ways technology arms tax teams with countless ways to meet today’s (and tomorrow’s) challenges.
Domino Effect of Changes
Changes in international compliance and their impact on federal taxable income cause a domino effect. Federal taxable income can’t be tied down until international is done. State compliance can barely start until federal taxable income is finalized. States have the added complexity and uncertainty of evolving conformity with the many federal changes.
Forms rely on common data, so information must be moved from one form to the next, requiring new sets of steps.
Further, more and more data must be gathered, organized, and fed into a reliable calculation to get information to the right tax forms. And because so much work must be done so quickly, many tax teams distribute tasks to different team members, making it difficult to re-harness the data.
From Chaos to Calm – Streamline International-to-State Reporting
All of this chaos is where CSC Corptax® restores order. Users structure, centralize, automate, and streamline tax processes throughout the entire tax lifecycle in a single database—and never leave the system. A database-driven solution allows you to manage, automate, and report tax data fluidly and maintain one version of the truth to easily share across the organization.
A single database for the tax continuum allows users to import and store data once, configure set-up and administration once, and reuse the same set of calculations, including international calculations, across compliance, provision, and planning. A common user interface simplifies the process even more.
As a single platform, Corptax easily incorporates changes into the entire interrelated tax process—and eliminates the inefficiencies and risks data dependencies create in siloed processes. Consider the following:
- Entity information is established through a single set of master data
- Sourcing and apportionment is automated through the creation of re-usable rules
- Master data and rules are used to automate E&P, GILTI, FDII, Subpart F, and Foreign Tax Credit
Form 5471: Automate Current and Future Changes with Data at Hand
Form 5471 embodies three key challenges today’s volatility brings:
- Sheer volume of data flowing to the form as a result of changes to the code and to reporting. This makes data more difficult to prepare and review.
- The form’s complex preparation is virtually impossible to manage manually. For example, in addition to new calculations like the I-1 for GILTI, details of existing information such as E&P must be broken out by category of income.
- Evolving guidance and interpretations of TCJA mean the form will likely need revisions over time.
Corptax addresses these challenges by flowing data from the source through calculations to forms and reporting at the right level of detail. The entity-driven database stores all ownership and equity transactions and automates calculations to the forms—including Form 5471 and schedules and baskets, and Forms 8992, 8993, and 1118. You always have confidence knowing ownership and equity transaction changes update forms across all reporting.
Like Form 5471, the level of detail required for populated categories of income on Form 1118 has expanded. Corptax automates deductions and Foreign Tax Credit calculations for Forms 1118 and 1120. As FTC calculations change, results flow automatically to Form 1120 and schedules, ready to review. Corptax connects data dependencies throughout the entire filing process to provide a single source of truth in real time.
Directly connect to data in the system and on forms, complete with underlying information. It’s fast and easy to automatically build and update real-time refreshable dashboards for diagnostics, forecasting, reporting, and your own analytics.
Less Stress for State Returns
Federal taxable income and dependencies from international calculations must be incorporated into state returns. Three major changes have occurred:
- Increased complexity and uncertainty as states adopt changes at different speeds.
- How states should conform to federal changes.
- The compressed time-frame state tax professionals have to complete their work.
Corptax automatically updates changes to federal taxable income, schedules, and state forms. State deductions, modifications, and add-backs are automated through calculations and updated based on state taxing jurisdictions.
The system continually updates state calculations to follow changes and mapping for state reporting—making it easier to understand which states do or don’t conform. And having centralized data accessible at any level helps you determine risk assessments and model state NOL usage for provision and compliance.
Plus, state calculations automate the flow of international results into state filings, saving even more time.
Restore Order, Confidence, and Peace of Mind
Corptax offers the only solution available today supporting international, federal, state, and local tax compliance. A global tax database provides the framework for a sustainable process to automate sourcing through returns without leaving the system.
- Structure data in one system at multiple levels of detail with one-click transparency back to the source
- Centrally store and manage the high volume of data needed to meet new regulations and forms
- Automate data in one database for smooth workflows, instant updates, and stress-free data sharing
- Systematize calculations, account for data dependencies, and automatically populate forms and schedules
- Easily analyze data to identify key drivers, trends, and anomalies when modeling and forecasting
About Gary Colbert
A recognized thought leader in corporate taxation, Gary Colbert, Senior Director, Content Management and Design Services, CSC Corptax, identifies market trends to understand how they will impact Corptax technology and Corptax clients. He is a registered CPA and holds a Bachelor of Science in Business Administration and Accounting from California State University and a Juris Doctor from San Joaquin College of Law.
About Rob Stuenkel
As a CSC Corptax Sales Engineer for more than 11 years, Rob Stuenkel works closely with clients to understand their needs, demonstrate how to make tax processes more efficient, and increase productivity in their tax departments. His extensive experience in the tax software industry, including roles in client support, product development, marketing, and sales, gives him the ability to address the unique challenges faced by corporate tax professionals. He holds a Bachelor of Business Administration degree from Texas State University and is a registered CPA.