Year-end tax prep: Managing regulatory updates for U.S. market expansion

Successful year-end tax preparation lies in the effective management of regulatory updates. It’s not just about knowing your tax rates or understanding your business’s nexus; it’s about staying abreast of regulatory changes. Imagine being on top of all your financials — knowing exactly how much you owe based on where your company operates — but missing critical regulatory updates.

A recent survey conducted by MetricStream polled 123 compliance professionals across North America and Europe. The survey uncovered a noteworthy finding: 19% of respondents reported spending up to a year adapting their business processes to comply with new regulatory requirements. This timeframe was once considered manageable, but now raises concerns given the rapid pace of regulatory evolution.

In the dynamic landscape of tax compliance, the ability to adapt swiftly to regulatory updates is key. As the financial year comes to a close, we delve into strategies for managing year-end tax obligations by navigating regulatory updates crucial for U.S. market expansion.

    1. Stay on top of regulatory updates    

Specialist publications serve as primary sources for direct insights into legislative changes, revisions to the tax code, and emerging compliance requirements. Additionally, industry associations provide businesses with specific regulatory information tailored to their sectors, enhancing their understanding of changes directly impacting operations.

Keeping track of specialised content can be overwhelming. Automated solutions like Avalara can aggregate, interpret, and deliver real-time updates, ensuring businesses get industry-focused insights without being overwhelmed. Combining insights from publications and industry networks can help create a robust strategy to navigate shifts in U.S. sales tax regulatory policies.

    2. Standardise taxonomy

LA cohesive understanding of regulatory updates is crucial for businesses operating internationally — this requires standardising taxonomy. Imagine a multinational corporation operating in various countries, each with its own set of tax laws and regulations. Without a standardised taxonomy, interpreting and applying these regulations across different regions can be incredibly challenging and prone to errors.

Standardising taxonomy in this context refers to creating a uniform system for classifying and organising tax regulations, such as income tax rates, deductions, and reporting requirements. Instead of using different terminology or formats for similar regulations in different countries, the standardised taxonomy establishes consistent terms and categories. Let’s consider the classification of deductible expenses. Without standardised taxonomy, one country might refer to them as “business expenses”, while another uses the term “deductible costs”. This inconsistency can lead to confusion and mistakes in tax filings while operating at a global scale.

For global entities, a unified taxonomy should align with organisational hierarchies, ensuring consistency across geographies. By standardising taxonomy, the multinational corporation can create a common language and structure for categorising tax regulations across all locations.

    3. Assign regulatory responsibilities

To ensure clear regulatory roles, businesses should define and communicate specific responsibilities for those overseeing regulatory and compliance functions. Subject matter experts within the organisation become essential players in this process. These individuals possess a deep understanding of laws and regulations and can scrutinise updates that apply to the nature of the business. Businesses can employ cloud-based content platforms to deliver important information to compliance professionals. Timely delivery allows businesses to efficiently interpret and implement regulatory updates.

    4. Assess business impact

Assessing the business impact of regulatory updates is crucial. This involves a comprehensive evaluation of how each regulatory change affects the organisation. The goal is to identify precisely how each facet of the organisation may be influenced and what adjustments are required to maintain compliance. Impact assessment is not solely about regulatory compliance; it also considers the broader business implications. By understanding how regulatory changes may influence various operational elements, businesses can proactively adapt strategies, allocate resources, and make informed decisions to minimise disruptions.

Throughout this process, businesses can use tools and platforms to streamline the assessment, mitigating potential risks associated with non-compliance by thoroughly evaluating all relevant areas. Let’s briefly understand these tools and platforms:

• Compliance management software: Centralises regulatory data, tracks changes, and automates compliance workflows.
  
• Risk assessment tools: Identify and evaluate compliance risks with matrices, scenario analysis, and risk heat maps.
  
• Regulatory intelligence platforms: Provide real-time updates and insights on regulatory changes and industry trends.
  
• Compliance monitoring solutions: Continuously monitor adherence to regulations and help address compliance gaps promptly.
  
• Collaboration platforms: Enhance cross-functional collaboration and communication among stakeholders involved in compliance activities.

    5. Design strategies to implement regulatory changes

Strategically implementing regulatory changes is the final critical step. This phase involves translating the insights gained from the impact assessment into actionable plans, ensuring a smooth and effective adaptation to evolving regulatory requirements. Formulating action plans includes defining workflows, assigning tasks to relevant individuals, and establishing approval processes. A standard workflow can guide the review and approval of proposed changes, incorporating escalation capabilities to address any overdue tasks.

This ensures everyone knows their responsibilities and timelines, minimising the risk of oversights or delays. Strategic implementation of regulatory changes helps businesses ensure compliance and seize opportunities for improvement. Achieving this balance demands a mix of technology, defined processes, and clear communication, where platforms like Avalara play a vital role in efficiently executing regulatory adaptations focused on tax compliance.

To summarise:

• Automation platforms like Avalara can help organisations stay informed about regulatory changes to ensure compliance in the U.S. sales tax environment.
  
• Establishing a unified system for categorising and organising tax terms facilitates consistent understanding and application across different regions and jurisdictions.
  
• Clear regulatory responsibilities are essential for accountability, supported by cloud-based platforms delivering crucial information to seasoned compliance professionals. Identifying in-house subject matter experts, along with leveraging services like Avalara, is key for scrutinising updates and providing valuable insights.
  
• Assessing the business impact of each regulatory update is critical. After the initial applicability assessment, business units conduct detailed impact analyses, identifying areas needing revision, including risks, controls, policies, procedures, training, and reports.
  
• Finally, implementing regulatory changes through well-defined action plans incorporating workflows, task assignments, and escalation processes ensures a seamless adaptation to evolving compliance landscapes.

Overlooking U.S. tax and regulatory updates can lead to costly errors and compliance issues. This is where automation technology like Avalara becomes indispensable. By leveraging automation, businesses can simplify the otherwise overwhelming task of managing regulatory updates. With Avalara, navigating changes in regulatory policies becomes more manageable, helping to ensure smooth year-end tax obligations even amid evolving compliance requirements.

Know how your business can stay on top of regulatory updates. Request a consultation with Avalara U.S. sales tax experts.