Corporate tax software allows businesses to streamline the tax filing process. Accountants within an organization can use these solutions to calculate taxes for company-wide transactions, file returns electronically, and store tax-related forms for both employees and the company itself. Some corporate tax software programs also offer features for determining exemptions, integrating with other accounting software, or syncing with company accounts to automatically import transaction data.
To qualify for inclusion in the Corporate Tax category, a product must:
Calculate taxes for large-scale financial accounts
Offer capabilities for filing tax reports
Provide latest rules and tax rate information
Why Use Corporate Tax Software?
While companies tend to consider tax management a necessary evil and a burden, many businesses are embracing corporate responsibility principles of transparency and accountability to differentiate themselves from competitors.
Compliance — There are many penalties that companies may incur for failure to file or failure to pay corporate taxes. Criminal liability is another consequence of noncompliance and can lead to the seizure of assets and even jail time.
Compliance is also crucial for the reputation of a company. Public companies need to be particularly careful when it comes to tax compliance because they are more likely to be subject to scrutiny by shareholders, customers, and the public. Research shows that “compliance is positively related to being publicly traded and in a highly regulated industry so that characteristics that assure public disclosure of information also tend to encourage better tax compliance.”
Accurate financial information — Aside from the obligation to comply with financial regulations, having accurate financial information is critical to the profitability of a company. Even small changes in taxes can have a significant impact on the revenue of a company when applied to thousands (or tens of thousands) of transactions.
Avoid tax processing errors — Tax processing errors are usually caused by inefficient business processes, outdated technology, and poor data quality. Errors can lead to penalties for noncompliance but can also take a lot of time and effort to fix. According to a Deloitte study, tax departments of companies that have not adopted technology spend up to 75% of their time on tax compliance, while businesses who use software can reduce the time spent on compliance to 20%.
Add economic value and contribute to society — It is well known that tax money funds most government investments. Corporate responsibility is also becoming a major priority for many companies, mostly due to the pressure of new generations of customers. By accurately managing and filing taxes, companies contribute to the economy and society and forge relationships with customers and consumers based on trust and transparency.
Take advantage of tax breaks, credits, and exemptions — Many companies that could benefit from tax breaks are not aware of the rules and procedures required (or are discouraged by their complexity). Corporate tax software can help with providing information on what options are available for each company depending on its size, industry, or other characteristics that may allow them to qualify for tax breaks.
What are the Different Kinds of Corporate Tax Software?
Like most financial software, this type of software can be delivered in the cloud or implemented on premises; in addition, vendors offer it as a standalone solution or packaged with other software. Each option has pros an cons that buyers need to take into account. As a rule, standalone cloud solutions are more affordable but not very sophisticated, while software suites are more expensive but offer more robust functionality.
Who Uses Corporate Tax software?
Accounting professionals who are responsible for tax management use this type of software to determine what taxes need to be processed, how, and when.
Executives, such as CFOs and CEOs, use corporate tax software to monitor activities related to tax management and ensure that the company complies with tax regulations.
Independent accountants use this types of software to help their customers with tax management compliance.
Corporate Tax Software Features
Corporate tax software comes in different flavors, and vendors tend to offer various tools or versions of the same solution for different needs. The features offered can vary by industry or company size and can be categorized into two main groups: basic and advanced functionality.
All corporate tax solutions should cover the essential features described above to qualify for inclusion in this category.
Basic features:
Tax rules and rates management functionality is a must for this type of software. It is also important to adjust rates and update rules based on any changes made by local, state, or national governments.
Workflows and schedules allow companies to plan all activities related to tax filing and payment, thus avoiding penalties for noncompliance. This type of functionality also helps users stay organized and productive.
Tax filing features allow users to submit all information and the documents required by law. It should include checklists for each tax category to ensure that everything is ready before filling.
In addition, corporate tax software includes information on tax breaks, how companies can determine if they qualify, and procedures to apply and track applications.
Reporting and analytics features are critical for this type of software because they allow users to track the efficiency of their activities and the accuracy of the tax information.
Reporting and analytics features are critical for this type of software because they allow users to track the efficiency of their activities and the accuracy of the tax information.
Advanced features:
Consolidation of tax information from multiple business entities across various locations is vital for medium to large companies.
Risk assessment and management allows businesses to identify and address potential issues that can lead to noncompliance.
Financial consolidation is used to gather tax information from multiple ERP and accounting systems across various locations.
Trends Related to Corporate Tax Software
While accounting software or accounting modules of ERP solutions usually offer some features for corporate tax management, medium to large companies will probably need advanced features. The main players in the ERP and accounting software sphere include corporate tax features in their offerings, but they focus mostly on large businesses. As a result, the SMB market was underserved for decades, until the cloud and the consumerization of IT allowed smaller vendors to fill this gap.
Most vendors providing ERP and accounting solutions for SMBs now have partnerships with cloud providers of tax management software. This strategy is more beneficial for vendors and their customers than developing new modules or solutions for tax management.
Potential Issues with Corporate Tax Software
Integration with accounting is critical but isn’t always easy for several reasons. Many companies still use old accounting software that can seldom integrate with corporate tax software, which is often delivered as a cloud model. In addition, the chart of accounts used by companies does not always include GL accounts for all types of taxes. This makes it difficult for companies to match the fields in their accounting system with those used by corporate tax management solutions.
Limited internationalization is a significant issue for companies that expand into new markets and geographical locations. For instance, a company that does business in the U.S. and Canada but also intends to open offices in Europe will not benefit from a corporate tax management solution that only covers North American tax regulations.
The lack of user expertise can impact the adoption of corporate tax software. Despite significant technological advancements, this type of software does not miraculously solve all corporate tax challenges. Its users still need to have the knowledge and experience to understand how to better implement and use the software.
Software and Services Related to Corporate Tax Software
Corporate tax software is delivered as a standalone solution or as part of a corporate performance management suite. The latter option is more beneficial for medium to large companies but can be too complicated and cumbersome for SMBs. Smaller businesses are more likely to benefit from standalone corporate tax software, which is typically more affordable and easier to use.
Companies of all sizes often choose to outsource tax management operations to independent accountants or financial consulting firms. Businesses that have the expertise to manage local taxes rely on consultants to ensure compliance when expanding into new geographical locations or when entering new markets.