How to Organize Your Tax Workpapers for an Audit
Many teams rely on workpaper Excel templates to support compliance, but general-use software like Excel can make tax work tedious and is prone to human error and devoid of controls and repeatability, and often relies on macro-based automation or extensive and complex formula-based automation. In short, Excel is archaic in comparison to the corporate tax tools available today, such as trusted tax workpaper software that includes built-in tax automation.
In this article, learn how tax workpaper software can help busy tax professionals mitigate audit risks, improve accuracy, and transform the way they manage the entire tax process.
What is a tax workpaper?
The Internal Revenue Code requires every taxpayer to keep records and statements necessary for the proper administration of U.S. tax laws. Workpapers underpin every major corporate tax deliverable, from financial statements to tax return filings. Tax workpaper examples include entries such as receipts, financial statements, bank statements, invoices (both issued and received), and other legal documents such as contracts.
How do you organize tax workpapers efficiently?
Many tax professionals manually prep data for use in workpapers, so organizing this information can be complicated and time-consuming. Challenges that come with manual work include cleaning and preparing source data, increased risk when updating tax calculations for multiple versions of source data, and an inability to trace calculations from the data all the way to the final computations.
Automation software may help busy teams better organize, review, and revise their tax workpapers because the best solutions on the market – such as those from Bloomberg Tax – give tax departments accurate, up-to-date information that can make minimizing risk and optimizing their position surprisingly easy.
Can Excel be used for auditing?
Yes. You can use Excel for audit tasks, and many tax professionals do just that. However, preparing workpapers using Excel can leave you decoding calculations, manually gathering data, double-checking late entries or last-minute changes, and worrying that you’re not in line with the latest tax laws. This can be especially problematic for larger entities managing a high volume of complex data among different teams.
Common errors in tax workpapers
The world of tax relies on accuracy, so errors are problematic. Tax professionals frequently need to build their tax calculation spreadsheets on their own, which often requires significant research and manual transformation of data – processes that are time-consuming and risky because they can hamper productivity. Complex calculations related to the latest tax laws can also lead to errors because tax professionals frequently make changes or consider different scenarios while using tax workpaper templates.
In addition, many small corporations outsource complex tax preparation, which can leave in-house tax staff unable to analyze the data on a detailed level because they lack control and visibility into the calculations and the data powering them.
Automating tax workpaper processes for audits
Instead of risking manual errors by using Excel, automation offers a way to streamline tax workflows, reduce errors, and even reclaim valuable time that can be spent on more strategic and higher-value tasks.
Other benefits of audit workpaper automation include centralized storage (so that workpapers are saved automatically) and enhanced system controls that create calculations pulled directly from company data.
See how Bloomberg Tax Workpapers gives you the control of spreadsheets with automatic data transformation and timesaving tax-specific functions, all in one solution.
Tax workpaper software benefits for corporations
For large entities, the importance of audit workpapers for compliance can’t be overstated. Tax workpaper software supports tax compliance for corporations by providing access to primary sources, expert analysis, and time-saving tools. Tax automation software also helps departments or teams easily collaborate in real time on the management of key documents from a variety of sources. For instance, Bloomberg Tax Workpapers allow teams to track changes to cell values and visualize overall progress through automatic saving, workbook-level sign-offs, and a progress dashboard.
Tax workpaper software also helps corporations by providing templates to simplify complex calculations such as GILTI, corporate AMT, and GloBE Pillar 2.
How does Bloomberg Tax Workpapers streamline tax workflows?
For audit-ready tax documents, Bloomberg Tax Workpapers is a first-of-its-kind solution that optimizes and transforms the workpapers process by giving you the control of spreadsheets with automatic data transformation and time-saving tax-specific functions, all in one solution. Plus, the entire suite of Bloomberg Tax products integrates to solve challenges in three key areas of the tax workpapers process: data, controls, and calculations.
With Bloomberg Tax Workpapers, tax professionals have access to automatic tax law updates with explanations, and automated data processes unique to tax professionals. These include trial balance cleansing, M-1 flux analysis, and period-over-period roll forwards. Ultimately, our software empowers tax professionals to gain total control of internal audit workpapers and establish best practices for audit workpapers.
Don’t let outdated tools hold back your tax team. Request a demo to experience the difference for yourself.