on 12-01-2021 7:40 AM
As part of US Tax Reporting, tax returns are filed and typical time for assessment to get completed by TAX authorities is 2 to 3 years from Reporting Year. There are instances where TAX authorities would reject any of our claims and direct to recompute taxes/depreciation expenses in favor of revenue. According to directions from tax authorities, my client's tax team posts adjustment depreciations in Tax Areas for reporting period. This has been their practice in their legacy system.
SAP standard typically allows opening of Current Year (N) and Prior Year (N-1). However, with reference to above business requirement, we need provision to open Asset Fiscal Years for prior years to make depreciation adjustments for Tax Areas that do not post to G/L.
Request you experts to share how this requirement was addressed your past experience and your thought how we can handle it in S/4HANA.
Pre-S/4HANA we would make tax depreciation only transaction type entries
In S/4HANA, you can post directly to a tax depreciation area - but I don't ever recall the IRS "requiring" opening up past fiscal years to make the adjusting entries. What does the client's tax accountants say?
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Hi Tammy
Its not IRS requirement to open the FY for adjustment but its my client practice to do so in their legacy system. On adjusting depreciation in FY for which assessment was done, subsequent FY depreciation gets recalculated and adjusted. Can you please let me know how depreciation adjustments are being handled in S/4 for past FY for which tax reporting was done?
I have reworded my question to avoid confusion.
Prior year adjustments (where I worked in the past) would be posted in current year, using a tax only transaction type (I realize these are now gone in S/4HANA). I don't work at a place now that has tax depreciation books (and we are on S/4HANA)
I can't recall a situation where we have opened a previously closed FY for a prior year tax adjustment.
Typically this is an accounting decision / call, along with a discussion with the tax accountants.
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