A Guide To Tax Compliance Management Software

Do you know that wizards have to pay 1000 Galleons of tax each year to the Ministry of Magic? Not only this but also the tax imposed by the Ministry of Magic can be as huge as 3000 Galleons per year. That’s huge! Do you know where all this tax goes?

Goblins collect taxes, file the returns and redirect the taxes to the allotted sectors – Hogwarts School of Witchcraft and Wizardry, St. Mungo’s Hospital, the Hogwarts Express and others. Apart from this, the Goblins keep learning and updating the new tax laws and regulations according to the Ministry of Magic and manage the clients’ deposits and assets. Phew! So much work on their plate.

Not only Goblins but people in the taxation department in any Muggle (read: non-magical) organization do the same. Except they might be more social than the Goblins! Who can blame them – they are always busy with their tiring job; however, we can help them with Tax Compliance Management Software. It can manage taxation woes by observing various laws and regulations, automating tax filing, reporting and more.

Curious to know more about this software? So, let’s hop aboard the Hogwarts Express to take an introductory course in Tax Compliance Management Software.
 

Station 1 – What Is Tax Compliance Management Software?

Before moving directly to Tax Compliance Management Software, let’s take a halt to understand tax compliance. It entails being aware of and adhering to the state, federal and international tax laws and regulations established by government officials and other tax authorities. It is more or less like the tedious job Goblins carry at the Gringotts Wizarding Bank. Now that we know about tax compliance, let’s move on to learn Tax Compliance Management Software.

Tax Compliance Management Software is a tool that provides accurate local and federal tax calculations and automatic tax form filing and reporting. Moreover, organizations can use the software to determine the correct tax amount by specifying pre-defined tax rates and brackets. The software aims to minimize human error by allocating income or revenue to the correct tax slab. Do you know tax compliance vendors offer separate programs to manage specific types of transactions and their associated taxes? Well, now you know!

Now that we know what Tax Compliance Management Software is, let’s take a short detour to look at its history.
 

Station 2 – History Of Tax Compliance Management Software

When in doubt, dig into the past!

Taking advice from Ron Weasley, let’s unravel the timeline of Tax Compliance Management Software.

Do you know, before the Revolutionary War, there were no income taxes and no federal government? (Well, that must have been a golden era!). However, time and taxes wait for no one. In 1788, Congress was entitled to lay and collect taxes, duties, imposts and excises so that the country could support itself. Income tax was officially born in 1861, imposed at the rate of 3% on all citizens who earned more than $800 a year. During the same time, Internal Revenue Service (IRS) came into existence. The Commissioner of Internal Revenue’s office was responsible for collecting taxes and relieving other states from this duty.

This was the time when tax compliance management was done manually i.e., the Goblins’ way. However, tax experts soon realized that even the most straightforward tax matters could become complicated and costly if certain details are missing or the tax is incorrectly calculated. These difficulties and the consequences of non-compliance were driving demands for professional tax compliance management solutions resulting in the birth of Tax Compliance Management Software.

Fasten your seat belts – the next station of the Hogwarts Express is all about the working of Tax Compliance Management Software.
 

Station 3 – Working Of Tax Compliance Management Software

Have you ever noticed how the Gringotts Wizardry Bank works? Well, the Goblins take care of all the chores in there, which not only saves money and safeguards the assets of wizards/witches but also provides a levy to convert muggle currency into wizarding money. Not to mention, the bank keeps records of all the taxes in Hogwarts. Now that the tax compliance management of Hogwarts is quite clear, let’s move ahead from the magical world into the real one to learn about the working of Tax Compliance Management Software:
 

Step 1: Select The Right Software

You have many options for Tax Compliance Management Software available in the market. Make a wise decision by choosing the best one according to your organizational needs, size and region.

Step 2: Install And Integrate

The next step is installing the software seamlessly in your IT infrastructure and integrating it with your financial tools and services so all expenses can be tracked.

Step 3:  Configuration

Optimize the configuration of the software so that it enables analytics and reporting features to work. This may include giving the tool access to financial data, expense data, invoices, etc.
After knowing its working, the Hogwarts Express departs for the next station – types of Tax Compliance Management Software.
 

Station 4 – Types Of Tax Compliance Management Software

It is no secret that there are many types of taxes. Some of them include income tax, payroll tax, sales tax and property tax. Naturally, different Tax Compliance Management Software takes care of different types of taxes. So, without further ado, let’s learn about the types of Tax Compliance Management Software:

The software is broadly divided into two types:
 

• Direct Tax Compliance Management Software

  Direct taxes are paid directly to the government (duh!) by the person they are imposed upon (typically accompanied by a tax return filed by the taxpayer). Its examples include income, corporate and transfer taxes such as real estate and gift taxes. Direct Tax Compliance Management Software maintains the company’s ledgers, cash management, accounts payable, accounts receivable, fixed assets and basic taxes.

• Indirect Tax Compliance Management Software

  An indirect tax is one in which the person who bears the ultimate economic burden of the tax (customer) is directly charged by an intermediary (for example a retail shop). An intermediary collects the indirect tax from the person who bears the economic burden and later files a tax return. (In short, this is like the tax the shop imposes on its customers in Diagon Alley!). For this reason, Indirect Tax Compliance Management Software has always been more complex to calculate distinct taxations such as VAT (Value Added Tax), service tax, customs taxes, etc.

The next halt is at the benefits of Tax Compliance Management Software.
 

Station 5 – Benefits Of Tax Compliance Management Software

“Curiosity is not a sin.”- Albus Dumbledore

Taking Dumbledore’s advice, let’s quench the curiosity of knowing the benefits of Tax Compliance Management Software.
 

• Enhances Tax Data Quality

  Minimizes false alerts and enhances the rules set by optimizing tax management and control. This enables businesses to meet digital mandates and financial data tracking demands.

• Minimizes The Cost Of Compliance

  Automated workflows and machine learning can eliminate the need for manual remediation or orchestration, increase transparency and boost connection times by providing automated remediation.

• Improves Compliance With Centralized Solution

  Your business solution can connect with other business solutions such as Enterprise Resource Planning (ERP), billing, or payment processing software to screen transactions subject to tax and enable instant remediation.

Sadly, the journey is about to end at the last station – the future of Tax Compliance Management Software. Ready to deboard?
 

Station 6 – Future Of Tax Compliance Management Software

Blockchain technology could be the future of taxation. Although it is in its infancy, it is set to enable seamless real-time tracking without needing a third party at every stage. No one can deny that total trust in the integrity of the taxation system could simplify tax compliance and administration. Blockchain technology will help in achieving this as it can deliver reliable, decentralized and real-time information management on an international scale. The most interesting part is the ability of blockchain technology to offer greater security, transparency and control over personal data which will provide significant benefits to the tax authorities. Isn’t it great?

Blockchain technology will also reduce the overall administrative burden and collecting tax costs. Moreover, blockchain might provide accounting for transactions, automate price setting and make adjustments for tangible goods, thereby reducing some of the complexity surrounding product taxes. The Goblins, too, need such technology - don’t you agree?
 

The Final Destination

Tax Compliance Management Software can help your organization comply with tax laws and regulations. By using this software, you can automate several processes related to tax compliance, including tracking payments, reporting and auditing, etc. Tax Compliance Management Software can also help businesses reduce their tax liability by helping them to file accurate tax returns.

Since the primary goal of tax compliance is to minimize your organization’s risk of being audited, choosing a tool that offers features that help you comply with regulations and reduce your overall risk profile is important. Our journey has come to an end. We hope you enjoyed this magical ride!