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Why You Shouldn’t Automate Tax Credits

Automation is viewed as a way to increase efficiency, rein in expenses and eliminate errors. Tax Credits is one business process that shouldn’t be automated.  If you haven’t invested in an in-depth and thorough review of your manual processes your automation won’t be successful.  And, when it comes to tax credits, there are too many nuances that technology can’t discern that can put you at risk.

1. Automation Doesn’t Equal Expertise:
Tax credit automation can’t replace the expertise of a tax credit expert. Relying solely on automation may cause you to miss out on eligible credits.

2. Automation Doesn’t Ensure Accuracy & Completeness:
Solely depending on technology can foster a sense of complacency.

3. Automation Doesn’t Eliminate Risk:
Tax credit laws are complex; relying solely on automation may lead to costly mistakes and audits.

A Deeper Dive into the Hidden Risks of Solely Relying on Automation

1. Automation Doesn’t Equal Expertise:

Overreliance on automation in tax credit processing can lead to the misconception that technology can fully replace human expertise, which is essential for interpreting complex and nuanced tax credit regulations, identifying opportunities, and managing risks. Automation systems operate based on predefined rules and algorithms, which may not cover all possible scenarios. 

Consequently, organizations that lean solely on automation risk overlooking eligible credits due to the dynamic and intricate nature of tax laws and the financial landscape. To ensure a comprehensive and accurate approach, it’s crucial to view automation as a supportive tool that complements human expertise rather than attempting to replace it entirely.

A2. Automation Doesn’t Ensure Accuracy & Completeness:

Assumptions that automation can entirely replace manual tracking often prove unrealistic. Manual oversight remains necessary due to the evolving nature of tax laws, variations in eligibility criteria, and the need for human judgment in evaluating unique scenarios. 

Moreover, overreliance on automation can create a false sense of infallibility, fostering complacency. Errors stemming from inaccurate or incomplete data can lead to financial losses and compliance issues. Organizations must acknowledge automation’s limitations and establish robust oversight and manual intervention mechanisms to ensure both accuracy and completeness in the process.

3. Automation Doesn’t Eliminate Risk:

The complexity of tax credit laws, the ever-changing regulatory environment, and the potential for misinterpretation make relying solely on automation a risky proposition. Automation systems are designed to operate based on predefined rules, and if these rules are not meticulously calibrated, they can lead to costly mistakes.

In particular, the intricate and multifaceted nature of tax credit laws means that organizations using automation as their sole resource are at risk of failing to adapt to changes in regulations, inadvertently overlooking compliance requirements, or making costly errors when interpreting the law. Such mistakes can trigger audits, which not only incur substantial financial costs but can also damage an organization’s reputation.

The risks associated with sole automation reliance in this domain are far too substantial to be ignored. Organizations that recognize the value of a human touch alongside automation will likely find themselves better positioned to capture and maximize available tax credits while minimizing risk.

What To Be Aware Of When Using Automation for Tax Credits

1. You’re Automating Your Entire Tax Credit Process

Relying solely on automation, without vigilant oversight, can result in missed opportunities and financial losses. Let’s look at a real-world example: a client decided to automate their entire tax credit process by integrating it with their applicant tracking and onboarding technology. They believed the automated process was doing its job. Fast forward to tax return time: the automation company revealed that a crucial step had been missed. Due to the lack of human attention to the process our client lost out on potentially tens of thousands of dollars in tax credits. This unfortunate incident demonstrates the treacherous pitfalls of unchecked automation in the tax credit process. Engaging a tax credit expert to maintain an active role in the process will ensure all steps are completed to maximize your tax credit opportunities.

2. You’re Relying on Technology Integration to Receive the Best Results

For organizations that thrive on technology integration to optimize their processes, exclusive reliance on automation, without considering the bigger picture, can lead to lost opportunities.  This example illustrates this: a client was utilizing a tax credit company’s advertising technology, which synced seamlessly with their project and issue management systems, automating the identification of R&D tax credits.  The automated system occasionally overlooked eligible items or mislabeled them. Even with integration, capturing all eligible expenditures accurately requires manual steps and human input. Ensure a comprehensive approach by being mindful of the need for human intervention, even in technologically advanced environments.

3. You’re Relying on All Your Own Inputs

To maximize your tax credit potential, it’s essential not to confine your efforts to self-generated inputs and instead embrace a holistic strategy. This was demonstrated in a recent client scenario, highlighting a common challenge for tax credits: the documentation of eligible business activities. Certain businesses solely rely on their existing systems, such as learning management or project management software, as the sole repository for tax credit documentation. However, numerous activities that could qualify for tax credits, such as informal training and research, often occur outside the formal tracking systems, potentially leading to missed opportunities. To overcome this limitation, you should expand your approach to include informal activities and seek expertise to identify and document all eligible tax credit opportunities effectively.

Do you fall into one of these categories? Overreliance on automation in the tax credit process can result in missed opportunities and financial losses, we’re here to help.

The Tax Credit Equation You Need to Know

Human Expertise + Automation + Technology = The Best Results

The element that truly makes the difference is Human Expertise. 

As companies increasingly turn to automation to streamline their tax credit processes, it’s imperative to remember that complete automation, without the right human expertise, can lead to missed opportunities and costly errors. While automation undoubtedly simplifies many aspects of tax credit management, it should be viewed as a powerful tool to enhance your efforts, not as a stand-alone solution.

The real magic happens when automation, guided by the expertise and oversight of tax credit professionals, becomes an integral part of your tax credit strategy. By striking this balance, businesses can navigate the complexities of tax credits with precision. This approach ensures that no eligible credit slips through the cracks, enabling businesses to maximize their tax savings. With more capital retained, companies are better equipped to grow, invest, and remain competitive in the ever-evolving business landscape. 

To learn more about how you can leverage Human Expertise with Automation and Technology to maximize your tax credits, reach out to us at