The course of a tax year offers numerous opportunities for property tax practitioners to hone their precognitive skills. The ability to read and interpret available data for signs of what’s upcoming in the tax cycle—and then to determine if action should be taken—is key to carrying out the job successfully.
But when it comes to predictive analytics and taxes, your predictions are only as good as your data. Having an abundance of relevant data means you have a better chance of understanding the variants that play into why things happen the way they do. The more detailed the data, the more insights you can pull from it—and the more accurate your predictions will be. (Tax technology and data analytics are natural partners for this very reason, so if you’re not already taking advantage of tax software you should be.)
Which parts of the tax cycle benefit most from predictive analytics? Take a look below to find out.
Is your property tax software making you work harder? If you’re experiencing any of these 12 challenges, it’s time to make a change.
Predictive Analytics & The Tax Cycle
Part of a property tax manager’s job is to forecast the expected property tax liability for the upcoming year’s budget. In today’s world (and certainly within a public company) it’s expected that you generate an accurate number, usually within a 5 percent range of actual taxes due. Reliable forecasting helps avoid the later adjustment of accruals, which are part and parcel with earnings reports. Therefore an organization needs accurate numbers to avoid volatility in its messaging to investors. The data you’ll need for predictive analysis in this area includes last year’s numbers; historical tax trends regarding the value of your property; and trends in the effective tax rate.
2. Accrual Predictive Analytics
After you’ve produced budget numbers and accrual projections for the next 12 months you start preparing and filing returns. As you progress through the filing phase, you may uncover new information (such as a recent investment that has a higher property value than you originally thought) that may affect your initial expectations. Predictive analytics can help you determine how much to modify your accruals to account for the change.
Also, once you’ve completed your returns and start receiving some assessments, you’ll have greater insight into the assessor’s interpretation of the value of your property—and it may be different than your own. Depending on whether you think the value can be reduced or the assessor has a valid point, your accruals may need to be modified in this stage as well. Accrual predictive analytics are based on a variety of data, including fixed asset data; data about the marketability or economics of those assets; general financial data to clarify the financial condition of your business; and industry analyst reports.
3. Assessment Predictive Analytics
Finally, you also want to do some predictive analytics around your assessments so you know what to expect when bills arrive. And if a particular assessment is higher than anticipated, it’s a sign you need to dig into why—what’s the reason for the difference? Doing so both ensures you’re being assessed properly and gives you the accurate data you need for the following year’s assessment predictions.
In addition to the operational analytics above, predictive strategic analytics related to your staff and workload can help keep your tax team running efficiently. Benchmark your organization against similar ones by comparing the number of team members you have, the types of roles they fill, and the amount of returns/tax bills being handled. Analysis of this data can help you determine if you’ll need to increase or decrease staff in the future.
As you progress through the tax cycle, your predictions should become more and more precise, eventually leading to actual numbers.
Tax Technology For Better Data Analytics
Property tax software is the easiest way to generate the detailed data required to make better decisions and accurately forecast the future.
Why? Because a software application utilizing databases forces a structure and security on your data, meaning it retains data accuracy even while you slice and dice the data in many ways. It also often can be used in conjunction with visualization tools (like Tableau, for instance), giving you a way to visualize the data and identify emerging trends.
CrowdReason property tax software easily and quickly gathers the data you need for analysis.
- MetaTaskerPT extracts unstructured data from tax notices, bills, and returns, and verifies and funnels it into our tax management software, TotalPropertyTax (TPT).
- TPT makes it simple to extract the now-structured and contextual data and use it in conjunction with visualization tools.
- All of CrowdReason’s products allow users to securely connect external applications and services to their property tax data via the use of APIs. This functionality is expressly unique in our industry, giving users significant insight into data records as well as expanded capabilities related to data analytics.
If you have custom data analytic requirements or need specific visualization tools, CrowdReason can build them into the software to meet your needs. Ask us about how our software tools work, or sign up for a demo today.