4 New Year's Resolutions for Tax Credits Compliance Management

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Gain control of compliance risks and focus more on potential rewards.

When it comes to employer-related compliance issues like those related to wage payments, payroll taxes, wage garnishments and health compliance, one of the first things that comes to mind for most companies is avoiding penalties and mitigating risks. With new legislation and changes to guidance related to both state and federal compliance requirements for employers, all too often companies are forced to focus on risks rather than the rewards they may be eligible for in the form of tax credits and business incentives.

But, with the right investment in people, process and technology, employers can go beyond just reacting to risks to leaning into the benefits of tax credits and incentives for which they may be eligible. As we head into 2022, here are some resolutions HCM compliance teams can consider to help transform compliance obligations into opportunities.

Resolution one: Stop leaving cash on the table

"There are thousands of state and federal tax credits and incentives out there that offer significant opportunities for companies to reduce tax liability, lower effective tax rate, or reduce tax expense—not to mention above-the-line opportunities," says Ewa Cater, ADP's tax and technology director, "which basically translate into cash"

One problem, says Cater, is that the burden of compliance can overshadow a compliance team's ability to dig deeper and pro-actively seek out potential tax credit opportunities. Another significant hurdle is simply having visibility to the tax credits and incentives available, both at the state and federal level, with an understanding which may represent the best fit for the organization.

Resolution two: Look for the right tools for your team

Relying solely on manual processes and siloed systems to manage compliance often places a significant burden on HR and finance team members. All too often, it prevents them from taking a bigger-picture, strategic view of the risks and rewards inherent to their roles, and it under-utilizes the skills and expertise they can bring to the table.

Preparing for year-end may be the best time to assess compliance obligations and go beyond them to explore potential tax credit opportunities to offset costs.

Today, centralized, secure incentive management platforms are available that can support a more structured approach to compliance, promoting transparency, and collaboration between HR and finance teams, which is often lacking when it comes to taking a strategic approach to tax credits and incentives. These platforms can provide real time access to an inventory of incentives programs and track those a company is participating in, including their potential value.

To overcome the time/effort overhead of complying with many incentives, these platforms help manage the length and the frequency of all reporting requirements tied to incentive agreements, along with critical filing deadlines.

Resolution three: Go from reactive to proactive

A critical path to capturing tax credits and incentives that can offset costs to employers lies in understanding the strategic objectives of the organization in advance—and being intentional about proactively looking for opportunities to offset costs that promote those objectives. Collaboration and access to the knowledge and expertise of key members of HR, finance and leadership is key.

Incentive management solutions can provide a digital project collaboration space, where stakeholders can analyze and develop a tax credit/incentive strategy that takes into account the knowledge, perspectives and needs of each stakeholder.

By providing a collaborative space that provides access to the collective knowledge and expertise invested in prior projects, teams can avoid any prior missteps or missed opportunities.

Performance-monitoring features that track meeting key commitments, such as job creation, new investment, or average wage, can relieve your staff from day-to-day and month-to-month compliance burdens.

Resolution four: Communicate, collaborate and embrace change

Change is hard in any context, but particularly so when you're talking about complex legislation and compliance requirements and taking on new tools and technology that can help tap into tax incentives at a deeper level.

Migrating from a simple desktop tool like an Excel spreadsheet to a collaborative platform requires getting buy-in from lots of stakeholders and securing budget. Change management is critical. Both the executive and the operational teams need to advocate for change, support it, and communicate across teams before, during and after the process.

Achieve a complete view of your portfolio and a broader range of possibilities with ADP.

ADP Incentives Manager brings together your data, your program and process dependencies, and a dedicated team of ADP experts to help guide your company along a simpler, shorter path to fulfilling compliance requirements—and potentially identifying more credits and incentives to pursue. Get information about the ADP SmartCompliance® Tax Credits module and Incentives Manager here.

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