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Auto Adjustments for Income Tax

System created adjustments for a tax expense

Updated today

This feature is included with Fathom Pro - the plan with access to all of Fathom's features. Companies on Portfolio can be upgraded to Fathom Pro at any time.

What are auto adjustments for tax?

To help cut down on manual adjustments, Fathom can auto-adjust your tax liability accounts to apply the tax formula backwards (into your actual date range) to a date of your choosing.

Why would you want auto-adjustments on?

One of the goals of Fathom forecasting is to allow you to create a new report for a new period and have the forecast data calculate automatically from that new period without having to make manual adjustments to the forecast (e.g. adjusting opening positions).

For most accounts, we can assume the opening position is stated clearly in the accounting data; however, for Corporate Income tax, the expense is typically added to the accounting data only at the end of the financial year, when preparing the tax returns.

Fathom’s ‘Inferred tax liability’ logic uses your forecast’s configured tax settings to automatically create opening journal adjustments, allowing a better statement of opening tax liability positions that are not yet included in the accounting data without having to adjust anything manually in Fathom.

Forecasts can then spin from any starting position, and a new set of opening tax liability adjustments will be dynamically created, specific to that particular period, based on the tax settings the user has configured.

Set up auto adjustments

A tax auto-adjustment can be set up in the 'Tax' section of your Forecast Settings for any tax expense.

To set up tax expense auto-adjustments:

  1. Click the Cog/Gear icon in the lower left corner of your forecast.
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  2. Select the Tax tab.
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  3. Click on the tax expense
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  4. Check the box to Auto-adjust tax liability

The auto-adjustment is posted to your ‘Adjustments’ section of Source Data in the Company Settings. It will appear as a Systems adjustment.

What if I make extra payments on my taxes?

If you create another journal entry in your Fathom forecast that impacts your tax expense account, Fathom will automatically reduce all auto-adjustment tax payments to account for this.

📝 Note: If you do not want to use Fathom’s ‘Inferred tax liability’ logic, then you can leave the checkbox unchecked and make manual adjustments, if necessary, in the ‘Company Settings > ‘Source Data’ > ‘Adjustments’ section. This will, of course, make the process less automated.

Remove system-created journals

If you would like to turn off auto adjustments for income tax:

  1. Go to your forecast.
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  2. Click the Cog/Gear icon in the lower left corner.
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  3. Select the Tax tab.
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  4. Scroll down to the Tax expense accounts section.
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  5. Click on the tax
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  6. Uncheck the 'Auto-adjust tax liability' checkbox at the bottom of the menu. You can do this separately for each tax listed in the 'Tax expense accounts' section.

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