Can Tax Planning Be Automated?
For many tax professionals in the workforce today, a primary goal is to become more efficient and accurate at every step and stage of practice. But often, busy schedules and heavy workloads can get in the way of progress.
If sweeping regulatory and legal changes occur, and you’re using manual processes in programs like Excel, it can be harder to accurately account for certain updates. But using tax software with automation capabilities can help with navigating and tracking these kinds of policy changes, which also helps you avoid mistakes.
And today, many corporate tax departments are investing in technology and automation to help them not only comply with regulatory requirements, but also manage the increasing volume of data.
So, how exactly does tax workflow automation support teams who want to plan ahead, make more strategic tax-related decisions, and improve their business outcomes? Here’s a look at how integrated technology can help you carry out more strategic, timely, and accurate tax planning.
What is tax automation?
Tax automation is used to streamline complex tasks that have traditionally been done manually, such as data collection, calculations, reporting, and filing. These manual workflows come with disadvantages and risks, including the possibility of human error, dependence on other departments for data collection, and inconsistencies in source system data.
By using automation technology, busy corporate tax teams can modernize their tax workflows even further by streamlining processes, improving accuracy, and optimizing tax strategies. Integrated automation solutions can play a critical role in helping tax teams mitigate common stumbling blocks and become more efficient and agile in their ability to respond to unexpected changes.
For example, with integrated tax solutions in place, tax departments can pivot more quickly to respond to legislative and regulatory changes, which frees up time for more high-level work while maintaining accounting protocols.
In short, tax workflow automation – when carried out using appropriate oversight and trusted technology designed specifically for tax professionals – can help you automate tedious tasks, minimize accounting risks, and put your business or clients in the best tax position possible.
Can tax planning be automated?
It’s clear that tax technology has many benefits, including increasing data accuracy and reducing risk, bolstering workflow consistency and transparency, and helping users avoid or cut down on time-consuming manual tasks. In fact, automation is critical to helping with tax functions.
That said, only parts of the tax planning process can be automated. Even with the latest tax technology innovations, human oversight remains essential for complex and strategic decisions. And software cannot replace the relational “human touch” required for tax practice.
Which elements of tax planning can be automated?
Certain workflow tasks that are time-consuming and repetitive in nature can be automated using trusted and integrated tax software.
Tax research
Forget spending hours poring over multiple outside sources. An integrated and comprehensive research platform like Bloomberg Tax Research can give you access to primary sources, expert analysis, leading news coverage, and time-saving tools.
Specifically, our AI-powered Q&A tool allows tax professionals to quickly retrieve valuable insights from a wealth of legislative and regulatory resources, which saves significant time. (No more searching across multiple platforms and scanning though dozens of search results to find a concise answer to your question.)
Faster access to trusted tax information puts tax teams in a better position to provide guidance to their business stakeholders, respond to business or economic changes, and make more confident financial decisions.
Get quick AI-generated responses to search questions – sourced from Bloomberg Tax’s trusted tax intelligence and integrated right at the point of application.
Data preparation and analysis
Cleansing and importing data is an essential first step in most tax workflows, and the process can be tedious when managed manually in Excel. Managing tax data from various ERP systems or teams with inconsistent formats can lead to errors and inefficiencies. All this time spent wrangling data is time not spent applying the tax law and identifying and mitigating risks.
Tax automation simplifies tasks like collecting and organizing data. Bloomberg Tax Workpapers streamlines the process by integrating directly with data sources, using secure file transfer protocols (SFTP) to pull and transform ERP and general ledger data into usable formats.
The built-in automation eliminates the need to recreate yearly manual data cleanup steps, reducing repetitive work before tax calculations and creating a repeatable process, even as your organization grows and data volumes increase.
Similarly, Bloomberg Tax Fixed Assets software integrates with data sources to automate book and tax depreciation reconciliations and allow for faster responses to business changes such as mergers and acquisitions.
Scenario planning
You can develop advanced depreciation models to quickly measure the potential outcomes of policy changes. These models can help teams forecast the financial impact of new regulations or tax reforms, ensuring organizations can adapt proactively. Some may also allow you to explore multiple scenarios and make more informed decisions with greater confidence.
For instance, Bloomberg Tax Fixed Assets allows users to model different depreciation scenarios to optimize tax positions and cash flow, bringing strategic value to their organization.
Routine compliance
Compliance is a key part of the tax process. Tax automation tools, like those from Bloomberg Tax, can automatically apply updates to tax laws and compliance standards, ensuring all calculations stay current with little manual intervention. These automated functions reduce error risks, alleviate the burden of repetitive work, and help ensure corporate tax professionals can efficiently meet their deadlines and requirements.
Additionally, the Bloomberg Tax Research Compliance Tracker feature automatically generates the required forms, due dates, and administrative guidance based on your entity details for seamless reporting and filing.
Instantly gather tax forms and track deadlines with Compliance Tracker, a feature of Bloomberg Tax Research.
Which elements of tax planning can’t be automated?
While tax automation tools can efficiently crunch numbers and quickly analyze vast amounts of data, they cannot replace the nuanced judgment, relational insights, or ethical considerations that tax experts provide. So, the following elements of tax planning cannot be automated.
Complex decision-making
As savvy tax professionals know, advanced tax planning strategies such as restructuring or international tax compliance inherently need human oversight to evaluate risks and opportunities.
The interpretation of ambiguity
Tax laws and regulations often include gray areas that can be open to interpretation. And automation cannot be relied upon to do this work, which means tax professionals must continue to provide the contextual understanding necessary for applying policies both correctly and strategically.
Stakeholder relationships and communication
Human connection is key when it comes to fostering trust and communicating intricate tax plans to clients or the C-suite in understandable ways. While automation can help get you the timely information you need to make more informed decisions, tax professionals must continue to nurture these critical relationships to be seen as strategic partners to their business or clients.
What is an example of automated tax planning?
In addition to increasing efficiency and reducing errors, trusted tax automation software can standardize workflows, improve accuracy, help tax professionals manage risk, and provide enhanced controls around tasks.
To begin the process of automating certain time-consuming tasks, start with a vision of what you want to accomplish operationally, both for tax technology and your tax department overall. For instance, perhaps you want more workable and manageable processes that your tax team can control. To develop this vision, consider your current pain points, how you want things to run in the future, and the initiatives and projects you’d like to improve and streamline.
Then, articulate this vision to your organization’s leadership. And clearly identify a road map for how to accomplish it. You don’t have to know how to accomplish everything immediately. But you should develop an understanding of how you can incorporate integrated automation software to help with your pain points.
Here is one specific example of how automation can help improve your tax planning process:
Tax depreciation modeling
Tax depreciation modeling is the process of calculating the depreciation of assets for tax purposes, following specific tax laws and regulations. It helps businesses estimate tax deductions over an asset’s useful life, optimizing tax liabilities and financial planning.
With software built specifically for fixed assets management, depreciation modeling tools enable users to analyze the potential impacts of planned capital expenditures and changes to bonus elections.
For example, in Bloomberg Tax Fixed Assets software, you can compare bonus depreciation scenarios in just a few clicks. The simulation will generate a report divided by class life for your current year assets, with a lump sum of the prior year assets at the bottom. Cost basis is added to the dashboard for easy reconciliation, as well as calculations for a no bonus scenario and a 60% bonus scenario. The report can be further segmented by entity and asset type.
These features provide strategic insights that would be challenging or even impossible to obtain within Excel or an ERP system.
The right software for automating tax planning
So, what should you look for when it comes to tax automation? The best tax software is easy to use and integrates into your existing workflows; it offers trusted tax intelligence; and it provides automated calculations and easy data manipulation to help you improve efficiency.
Key functionality to look for in tax automation software includes:
- Seamless integration with existing systems and other tax technology
- Streamlined data management
- Flexible, accurate modeling
- Automatic tax law updates
Want to learn more? Register to watch the on-demand replay of Bloomberg Tax’s webinar, How the Tax Department Is Changing: Automating the Tax Workflow, and find out how to leave painful manual processes behind.
Request a demo to see how Bloomberg Tax’s suite of solutions for integrated tax workflow automation can help you elevate and simplify your work, reduce risk, and carry out more effective tax planning.