4 Strategies to Comply with the New Tax Law
What companies should be doing now to prepare for all the new rules embodied by the 2017 Tax Cuts and Jobs Act.
The $1.5 trillion Tax Cuts and Jobs Act, signed into law in December 2017, is an overhaul of business, individual, and international taxes in the United States. It’s the largest revision to the tax code since 1986, and it changes the way public and private businesses of all types and sizes are taxed.
The law includes sweeping changes intended to help drive economic growth, including a flat 21 percent corporate tax rate that replaces graduated tax brackets. The new rules also impact, among other areas, expensing of capital expenditures, deductions, purchases, inventories, charges for foreign earnings and profits, net operating losses, and year-end disclosures.
Only 1 in 3 Businesses Feel Well-Prepared
This tax overhaul presents major financial reporting implications for companies. But research suggests only a small minority of organizations are confident they are ready to handle the changes. In a recent Robert Half survey, only about one-third (32 percent) of respondents said their business is “very prepared” to meet the tax cut’s new requirements.
Companies that aren’t ready to take on these new challenges—and seize potential opportunities presented by the overhaul—need to ramp up their efforts immediately. This is particularly true for organizations that will need to do more work to comply. Since the new rules affect all companies, no business can afford not to move as quickly as possible.
If your organization is among the less-than-prepared, the following four strategies can help you jump-start your efforts to get up to speed on this legislation:
Strategy 1: Add more full-time accounting and finance staff, and accelerate hiring.
One reason many businesses are struggling to adapt to the tax cut is that they simply don’t have enough accounting and finance staff in place to handle the changes. Some firms are already stepping up to fix this problem. When finance leaders in the Robert Half survey were asked how their company is preparing to meet the new demands, 21 percent said they are hiring more full-time staff.
But doing so isn’t as simple as it may sound. Finding skilled resources available for hire can take time in the current environment. Fewer than 1 in 10 finance leaders surveyed said they don’t face at least some challenges in finding skilled professionals. The job market is strong, and millions of jobs are still waiting to be filled. The unemployment rate is extremely low for most in-demand accounting and finance roles. For example, recent figures from the U.S. Bureau of Labor Statistics show the unemployment rate for accountants and auditors is just 1.8 percent.
To compete for talent, you’ll need to offer a starting salary that’s at or above the current market rate. And if you’re fortunate enough to attract the candidates you want, you’ll have to move quickly to bring them on board. There is a very shallow pool of talent, and job candidates know it: Other research by our company shows that top talent won’t tolerate a long hiring process.
Further, your job is not done once a candidate accepts your offer. A smooth onboarding process that tells your new hire he or she made the right decision in joining your team is key to your short-term retention efforts.
Strategy 2: Lean on outside resources for additional expertise and training.
As companies search for the right people for their accounting and finance teams, how are they managing compliance with the new tax law in the meantime? In many organizations, CFOs and controllers are taking the lead on adapting to the rules. In small and midsize businesses, these responsibilities may fall on the shoulders of senior and staff accountants. Organizations are also tapping outside subject-matter experts. More than one-third of the finance leaders Robert Half surveyed about the new tax law said they are following this approach.
Forty-two percent of finance executives said their business will need to conduct training to meet the demands of the new tax accounting rules. Some are turning to professional associations like the American Institute of CPAs (AICPA), for example, whose conferences feature a wide range of training sessions dedicated to tax reform. Also, many service providers are offering webcasts, seminars, and professional education courses on financial planning considerations and strategies associated with the new tax changes. Consultants may also be able to help train a company’s full-time staff on the new tax mandates and assist them with changes related to their internal processes.
Strategy 3: Assess whether your financial systems can handle the tax changes.
Finance leaders need to evaluate their organization’s financial reporting systems to make sure they are prepared to meet the new requirements. Here are two areas in which your business is likely to face technology challenges, at least in the short term, because of the new law:
- Expensing. Companies could previously expense entertainment expenses and meals—such as taking an employee, client, or prospective client out to lunch—for a 50 percent deduction for business purposes. Because these items are no longer tax-deductible, your business might need technical assistance adapting software to separate deductions in your general ledger for employees’ meals and entertainment expenses.
- Payroll. Changes in withholding methods and calculations may require the implementation of new business systems. New withholding tables from the IRS are designed to prevent most taxpayers from over- or under-withholding. They also reflect higher standard deductions and the elimination of personal exemptions. Many employers’ payroll systems must be redesigned to execute the new law’s individual income tax rate cuts and taxable income bracket changes.
Strategy 4: Redouble your retention efforts.
There’s a good chance your accounting and finance team members were already feeling stretched a bit thin before the new tax law went into effect. Rising workloads due to business growth and the need to keep up with other compliance requirements were probably among their stress factors. You don’t want to further increase the risk of losing valued employees as you navigate changes from the new tax law, so it is even more important to ensure key staff members are satisfied with their jobs.
Offering competitive compensation is one essential tactic, of course, but it may not be enough. Do everything you can to push your salaries just a little higher than what competitors in your industry and market are offering. And if you really can’t budge on your staffing budget, look for other ways to make your firm a magnet for in-demand accounting and finance talent.
Professional development opportunities are a perk many professionals covet. You’ll likely find your millennial and Generation Z staff members place particular importance on the chance to take on new challenges and grow professionally. However, it’s a sure bet that any employee on your team would welcome the opportunity to build knowledge and skills. Just be sure to focus on development opportunities that will truly help them build the leadership and interpersonal abilities needed for jobs with greater responsibility.
Offering a healthy balance between professional and personal demands is another key way to retain your best people. If you’re not sure which arrangements they’ll prefer, ask them—either in person or using a questionnaire that allows respondents to remain anonymous. Flexible scheduling, work-from-home opportunities, and job sharing are likely perks your employees will request. The point is: The more you know about what your staff members require for better work-life balance, the more attractive your policies will be to them.
Without question, the new tax law has thrown a curveball at accounting and finance teams. If your firm is among those scrambling to comply with the federal tax overhaul, take some comfort in knowing you’re not alone. But then move right away to assemble the resources and support your business needs to accommodate the new mandates.