Processing Tax Equalization Returns

Employees who work in a foreign country are subject to a global taxation that may be higher or lower than what they would pay domestically. The objective of tax equalization (also referred to as hypothetical tax) is to adjust an employee's tax rate so the employee does not experience any financial gain or loss due to the international assignment. Tax equalization allows expatriate employees to pay a tax amount that is approximately the same as if they had worked domestically.

After an employee's Individual return is completed, you can create a tax equalization return to negotiate taxation for employees who are on foreign assignment. You can then make a comparison with the company withholdings to determine if the employer owes any compensation or if the employee must pay a tax liability.

If your firm is licensed for tax equalization and you are granted permission to add tax returns, you can create a tax equalization return as a new version of an Individual return for tax year 2012 or higher.

Note: The Individual source return must have fewer than nine versions and cannot be a converted return.

Before you create the batch, ensure the Prepare tax equalization box on the General > Foreign > Tax Equalization worksheet in all source returns is selected.

Batch Manager allows you to set filter criteria to select specific returns for batch tax equalization processing. Do the following to submit or schedule a batch job to create Individual tax equalization returns:

1. Open Dashboard, click Application Links on the navigation panel, and then click Batch Manager under Tax.
2. Select New Job > Tax Equalization from the Job Management group on the Home tab.
3. Use the filters to limit what displays in the grid. Click the Select Returns bar to show or hide filters. Setting filters to a value other than All results in fewer returns displayed in the grid.

Explain how to show, hide, or replace filters.

• Hide or replace. You can hide or replace all filters except the Tax Year and Return Type filters by clicking the down arrow beside the filter name. Select another filter to replace the current one or click Remove to hide the filter.
• Show. Click Add Filter and select an available filter from the list.

Explain the available filters and processing options.

Component	Description
Tax Year	Displays the tax year in the grid.
Office	Displays all offices in the grid or limits the grid display to one office.
Business Unit	Displays all business units in the grid or limits the grid display to one business unit. This filter is available if your firm has configured at least one business unit.
Return Group	Displays all return groups in the grid or limits the grid display to one return group.
Last Activity	Displays all activities in the grid or limits the grid display to one activity.
Signer	Displays all signers in the grid or limits the grid display to one signer.
Return Status	Displays all return statuses in the grid or limits the grid display to one status.

4. Click Go to display results for your filter criteria in the grid. If there is a large number of returns, a progress window displays.
5. Sort columns in the grid to locate the returns to include in the batch.

You may also consider sorting the Password Protect column to locate returns that will require you to enter a password before continuing the batch process. You will also have the option to skip password protected returns.

6. Do any of the following:
   • Select individually. Select the check boxes to the left of the returns to include in your batch job.
   • Select all. Select the box at the top of the column to select or clear all returns in the grid.
   1. Show me the grid options.

   Component	Description
   Show selected returns only	Select to display only the returns that you have selected in the grid. Clear the check box to show all filtered returns.
   Find Next	Enter the complete criteria to search for specific records or enter partial information to search for similar matches in the Search box located at the top of the window. Then, click Find Next to select the first or next occurrence of your search criteria in the grid. Note: You can enter alpha, numeric, and special characters to locate records.
   Hide/Show Filters	Click the double up or down arrows near the top of the window to alternately hide or show filters, giving you more or less area in the window to review returns in the grid.

7. Click Continue to display your processing options. Your filter selections are saved the next time you create the same job type. If authorizations are required to process one or more of the selected returns, click Yes to confirm the process or No to abandon the process.

Note: You must enter a password for each group of returns that is secured for a client.

8. If there are existing tax equalization returns for some of the selected returns, select one of the following TEQ options. This step is not necessary if this is the first tax equalization return for all returns in the batch.
   • Overwrite existing return. The most current version of the return is replaced with the new version by default. The version that is overwritten will be visible in the Job Detail Report.

     Note: If a return was previously overwritten, the most recent version might not be the one that has the highest number. For example, if there are nine versions of a return, and you overwrite version 2, then version 2 becomes the most recent version of the return.

   • Create new return version. You can create as many as nine versions of the tax equalization return.

   Note: If you choose to create a new return version and the maximum number of versions has been reached, an exception will be visible in the Job Detail Report.

9. Select one of the following to indicate how differences in client information between the returns and the client profile are handled.
   • Keep current client information. Do not update the client information in the returns with information in the client profiles.
   • Update returns with client profile data. Replace the client information in the returns with information in the client profiles.
10. Click Submit Job to send the job for immediate processing or Schedule Job to set a future time to process the job. See Scheduling and Rescheduling Jobs for more information.

The source returns and tax equalization returns are saved, and, if needed, source returns are calculated when the batch job is processed.

Authorization information, as well as lists and notes, are copied from the source returns to the tax equalization returns. On initial creation, the tax equalization returns contain the same input as the source returns, with the following exceptions:

• The tax equalization returns contain the results from adjustments and overrides, but the detail forms do not. For example, an entry to override taxable interest income overrides Form 1040, line 8a, but does not appear on Schedule B, line 4. Likewise, an adjustment to dividend income adjusts Form 1040, line 9a, but does not appear on Schedule B, line 6. This exception applies to all detail forms, not just Schedule B - Interest and Ordinary Dividends.
• Printing Forms 1116 and 2555 is suppressed when not in tax equalization calculation, but the calculations are still viewable even though they are not used in the tax equalization returns.
• Some Form 1040 items are not used in tax equalization calculations, such as payments; however, the payments section of Form 1040 is completed.

The following two settings in tax equalization returns cannot be changed or removed:

• Version description. Tax Equalization Return
• Print  watermark. Do not File

To view the tax equalization return ID, select the Tax Equalization job in the Job Status grid and click View in the Job Detail Report group on the Home tab. For more information about the Job Detail Report, see Using Reports to Review Batch Jobs.