On December 22, 2017, President Trump signed tax legislation known as the Tax Cuts and Jobs Act (the Act). The Act is the most dramatic change in corporate tax rules in over 30 years.
Accounting for the impacts of the Act will increase the risk of financial statement errors. Whether issues arise from complexity in the new laws or from the application of ASC 740 to your tax technical conclusions, you need to simplify your ASC 740 process in order to be successful, and mitigate that risk.
CHANGE IS COMING
Your spreadsheet process may have been “good enough” to get through previous financial statement audits. But with all the modifications that are going to be required as a result of tax reform, the risk of calculation errors increases significantly.
Tax Prodigy Provision eases the transition to the new rules and lets you focus on the law, not the mechanics and maintenance of spreadsheets. When you create a new perm or temp in Tax Prodigy Provision, it propagates to all of the entities in the return and will automatically flow to the appropriate states and all relevant calculations.
You can implement Tax Prodigy Provision in days or weeks, not months. Most companies can implement Tax Prodigy Provision faster than they can modify their spreadsheets and at the same time, eliminating the risk of errors.
UNCERTAIN TAX BENEFITS
The number of uncertain tax benefits will likely increase as a result of the lack of guidance under the new law. Additionally, you may take uncertain tax positions to increase deductions or defer income recognition ahead of the change to the lower rate. This will result in additional rework of spreadsheet processes that can be avoided.
With a lower federal rate, states are a bigger piece of the tax pie. There will be more variation amongst states due to non-conformity with the federal law. You should expect increased scrutiny from auditors around states and less willingness to accept the use of a blended state rate. This additional focus could cause significant rework of your spreadsheet process but is easily handled in Tax Prodigy Provision.
There is still time for Tax Prodigy Provision to help you. The SEC guidance issued under SAB 118 allows companies to use reasonable estimates to calculate the provisional impacts of the Act and then revise those estimates as more information is available and the work is completed in subsequent accounting periods.
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