This is a newsletter from
J.D. Choi of
Tax Technologies, Inc. to tax
professionals whose interests are improving the tax management processes.
Table of Contents
- Busy Season Recommendations
1. Busy Season Recommendations
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Since most of you are busy with compliance tasks during this time of the year, I will be brief. With the ever-growing compliance work with less and less headcount, tax compliance is becoming an overwhelming task. Here are few tips that may help you avoid crunch-panic season.
Tip #1 - Organization
I have found that, in most cases, organizing the work up-front produces the largest benefit. As most of
you understand, tax compliance processes are collection of parallel and linear processes; many things have
to happen, yet most of them have to happen in sequence. For example, the international tax reporting, such
as completion of Forms 5471, 1118 and related computations, must precede federal returns although all of them
are processed by separate groups of people at the same time. Taking this analysis further and develop a
detail compliance plan would produce a great deal of efficiency and better allocation of resources. Most
last minute crunch, in my view, is a result of poor front-end planning or simply due to lack of resources.
Organization of compliance processes should follow the content of the return. For example, in order to
complete the Forms 5471 and 1118, the preparer must understand the logical relationships throughout the
subpart F income calculations, distributions and related deemed paid credit calculations. Once the logical
order is set, actual preparation of the returns can be performed by the lower level staff. So, first tip on
compliance - GET ORGANIZED.
Tip #2 - Separate the tax content analysis from the mechanical processes
This proposition is especially true when dealing with large-scale returns. Most of us are not very good
at separating "what it is" from "how to do it" when dealing with abstract matters such as tax. Most compliance
people worry about how to do certain things in a tax software as they do the analysis. This mixture of thoughts
about the tax content analysis and mechanical compliance processes slow down the thought process and preparation
of returns. For example, most tax data collection packages require intercompany transaction details (unless it
is provided by ERP). It is better to put together, in one place, a summary of all intercompany transactions (the
"analysis"). Once completed, all that is left is the mechanics as to how to enter the data in the system (the
"mechanics") and how to analyze the results from the system. One word of caution, the analysis must be as good
as it can be with the data available at the time. Do not keep the users guessing. For example, the intercompany
transaction summary prepared by an analyst must be so reliable that the users of the schedule need not second
guess the correctness of the schedule and probe into the supports. Otherwise, you just wasted a lot of time for
nothing.
Tip #3 - Make decisions and move on
One of the most significant bottleneck in the compliance process at the preparer level is the lack of ability
to make decisions on petty issues. Particularly because tax compliance processes are collection of many linear
processes, inability to make decisions promptly creates significant delays in conjunctive processes. Providing
the return preparers with pre-set guidelines on general matters would help a lot in speeding-up the compliance
processes.
Tip #4 - Create reasonable deadlines (and stick with it!)
It is our responsibility to prepare accurate tax returns. However, it is very difficult (if not impossible)
to prepare perfectly correct tax returns, largely due to lack of supporting data at the time when the returns
are prepared. Further, the future events will alter the contents of current returns. Thus, it is practical to
set a series of deadlines and prepare the tax returns based on the information made available within the data
collection deadlines. This would allow decision-making processes much easier and will help you avoid the last
minute crunch. Of course, this does not mean to create an inflexible processes. The benefit of having reasonable
deadlines should outweigh the detriment of having to adjust the returns in the future.
Tip #5 - Let the preparers know when to stop
Many of the preparers are inexperienced staff people. Often times, they are not sure when to stop working
on the returns and, consequently, leave the files open as incomplete, thinking that they will get back to the
issues later. It is very important to let them know when and how to conclude a return. For example, staff people
often leave files unfinished for unsupported tax payment details or unreconciled intercompany payments. LET THEM
MAKE ASSUMPTIONS and FINISH THE RETURNS. In most cases, if the information is not available by the time the
returns are prepared (with reasonable efforts for data collection), the same information will not be available
by the time the return is due anyway.
Our website got a makeover
The common complaint against our website was the refresh speed. Well, we simplified our website and it is
loading much faster. We've done few other things as well.
Come and use our web site! We have expanded available tax forms in our download page. Most of the tax forms
and instructions for international tax compliance are in our website. These forms are in filler PDF format, which
means that the forms can be typed in with your information. We will be adding standardized statements and elections
soon. Also, we are planning to add the data collection packages (including the one for CFP) later in the year.
So, check them often. If you would like to see something added to our website, please write to us.
We have added community bulletin page. On this page, you may post recruiting information for tax people. Since
most of our visitors are from big four accounting firms and international tax people from corporate tax departments,
it would be a good forum to recruit employees for international tax jobs. So, if you have an opening, send us an
e-mail.
We have also added links to other useful sites. For example, we have linked a site that would show you historical
exchange rates for a given period. It would be helpful for those of us having to file Form 5471s this season.
The content of this e-mail is reproduced in the "Newsletter" section of our website
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Regards,
J.D. Choi
CEO, Tax Technologies, Inc.
201-387-9451
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