Tag: Compliance

Tax Relief Opportunities That Could Enhance Your Operations

Posted on by info

Although companies that have managed to survive up to this point will have overcome immediate safety and cashflow problems, they still face an uncertain future. No one can predict how long the downturn will last, whether the world will revert into crisis mode or whether the path towards long-term recovery has begun. 

Despite the persistent uncertainty, savvy companies can position themselves to outperform their competitors by capitalizing on market shifts and strengthening their core business models. To do so, liquidity will continue to be at a premium, but many companies at this stage should be able to spend a bit in order to reap considerable returns. The tax function is poised to help them do just that.

After conquering tax solutions that are within reach, it’s time to consider low-risk strategies that will plant the seed for future growth.

Consider which tax strategies can help you find a competitive edge, including: 

  • Uncovering missed opportunities for savings: Look for potential projects that, though they may require an upfront investment of time and capital, have the potential to uncover significant savings opportunities.
    • R&D tax credit studies: The money companies spend on technology and innovation can offset payroll and income taxes via R&D tax credits. The credits benefit a broad range of companies across industries, yet many businesses are leaving money on the table.
    • Property tax assessments appeals: In the wake of the COVID-19 pandemic, some jurisdictions are reevaluating their property tax processes via disaster relief and conducting assessments at an earlier date. Property tax appeals can generate cash savings by challenging assessed values and reducing property tax liabilities.
    • Cost segregation studies: Cost segregation studies can help owners of commercial or residential buildings increase cash flow by accelerating federal tax depreciation of construction-related assets. Depending on the type of building and cost, the increased cash-flow and time-value benefits are often significant.
  • Advising on business decisions: In this phase, it’s likely that your C-suite is beginning to think about what’s next. Tax professionals should aim to provide strategic insights into the tax implications of these critical business decisions, including supply chain shifts, transactions, restructuring and more.
  • Maintaining compliance: If your business secured any federal funding in the early stages of the pandemic, those funds likely came with certain tax and financial reporting compliance measures attached. Work with the finance and accounting department to ensure that these benefits don’t result in unexpected penalties and costs. You should also aim to secure forgiveness for any forgivable loans. 
  • Continue to grow liquidity: Cash is still key to navigating an uncertain road ahead. Continue to leverage liquidity-generating tactics, such as:
    • Evaluating accounting methods and making changes, if necessary, to defer income tax and increase cash flow.
    • Reviewing transfer pricing strategies to identify opportunities to optimize cash flow.
    • Pursuing a tax deduction through charitable donations.
    • Maximizing state NOLs through elections, structural changes, intercompany transactions and triggering unrealized gains.

Businesses that effectively use tax strategies to focus on seizing the strategic opportunities they do have will be able to make the most of tough conditions and emerge as market leaders. 

Tracking Global Equity Through Automation

Posted on by info

How to manage global equity compensation is an increasingly complicated question. The answer? Automation.

The world is getting smaller, and while the emergence of a globally mobile workforce has allowed companies to maximize talent where it’s most needed, it has simultaneously generated a host of challenges when it comes to managing executive compensation. The taxation of equity awards is particularly complex, and can vary greatly depending on the type of award, the structure of the organization, the tax attributes of the recipient, and their location(s). This complexity is further exacerbated by new compliance and reporting requirements.

Companies are approaching these challenges in a variety of ways. Some are burying their heads in the sand and hoping that they won’t receive a violation notice. Others know they need to address these issues but aren’t sure how to get started. Even the most proactive businesses can fall into the trap of just repeating what’s been done in prior years instead of adjusting their processes to match the new regulations.

There’s a reason for this hesitation: Getting their procedures up-to-date and compliant isn’t easy. Businesses face steep costs in terms of both dollars and manpower. Many struggle to identify and dedicate the appropriate resources needed to develop and execute a comprehensive compliance plan—including maintaining the internal bench strength needed to gather and update information, acquiring the necessary tools to collect data, and operating payroll in every jurisdiction where employees are present. With new regulations released on a near-daily basis, centralizing and adjusting information in real-time is an uphill battle.

But it’s important to remember that while getting things done right the first time isn’t cheap, neither is going back to correct it later.  
 
Incorrectly reporting global equity typically leads to underreporting in some jurisdictions and overreporting in others, but these aren’t the only consequences. There can also be significant hard costs, including both penalties and interest payments, which, depending on the scale, could lead to a significant cash flow problem for the business.

Another, possibly more critical, consequence of incorrectly tracking global equity is damaging the employer-employee relationship. If businesses generate compliance issues related to equity awards, employees face problems with their personal income tax returns. With talent at a premium, companies should avoid generating significant problems for their workers and seek to minimize the risk as much as possible.

Companies would also be remiss to discount the potential reputational damage they might incur as well. For smaller businesses expanding into new markets, being reprimanded by a foreign tax authority may cast doubt on future growth potential. For larger companies, media and shareholder indignation can generate concerns that go beyond just the tax and accounting departments.

At the core of this problem, businesses are dealing with myriad compliance requirements and fragmented data, complicated by manual processes with a high potential for human error that can lead to disastrous consequences.
Enter automation.

Automated programs can assist companies in combating many of the challenges related to the taxation of global equity plans. Automated software can place all the equity compensation and payroll information from across a company into one place, rather than being spread across different offices and jurisdictions. By utilizing transaction data and cross-border travel information, automated tools can provide calculations of tax withholdings for an organization’s mobile employees in real-time using data from jurisdictions around the world. Doing so helps companies avoid costly fines, end-of-year scrambles, and time-consuming payroll report amendments and corrected W-2s. And, with global compliance requirements changing at a rapid pace, automating tax withholding enables taxation estimates to pivot and adjust on a dime to keep up with new regulations.

Some companies might think that they’re too small to own an automated solution, or that adopting one will be an expensive endeavor. However, a good program can be adjusted to the size of your company and scale with it. Over the long run, the cost of adopting an automated solution pales in comparison to the financial and intangible costs of noncompliance.

It’s important to note that while automation provides a potential solution to a critical challenge of managing global compensation, it’s still just one tool in the toolbox of compensation professionals and consultants. It’s critical to have experienced professionals designing competitive and cost-effective compensation plans customized to each company and individual employee. Software merely eliminates time spent on collecting, scrubbing, and aggregating data.

Companies can no longer afford to ignore compliance issues related to global equity compensation. With seasoned professionals equipped with automation, businesses can increase the efficiency of their processes, reduce costly errors, and maintain the focus on developing compensation plans that work for them and their employees, regardless of where they’re located.