Setting up a Tax Export for CCH ProSystem fx

The Export command allows you to export Working Papers data to tax software. To set up your file, use the following procedure:

Select the Tax Jurisdiction, Tax Entity, and Tax Vendor in the Engagement Properties dialog.
Assign tax export codes to accounts in the Trial Balance.
Set up Federal Tax adjustments in the Adjusting Journal Entries screen.
Create the export file using the Export command.

For tax exports to CCH ProSystem fx, please refer to the instructions below.

Selecting the Tax Jurisdiction, Tax Entity, and Tax Vendor:

In order to export, the tax software must be specified in the Engagement Properties dialog.

On the Engagement menu, select Properties.
In the Tax Jurisdiction drop-down menu, select USA.
In the Tax Entity drop-down menu, select the appropriate tax entity.
In the Tax Vendor drop-down menu, select CCH ProSystem fx Tax.
Complete the remaining fields if not already populated.
Click OK.

Assigning tax export codes from the Working Trial Balance:

On the Account menu, select Working Trial Balance.
For each account, under the Tax Export Code column, click the drop-down arrow and select the appropriate tax export code from the Tax Code List.

Note: The M3 Code column is not normally used for CCH ProSystem fx Tax. Working Papers exports to CCH ProSystem fx Tax, which then updates the line in the M3 schedule associated with a tax export code. CCH ProSystem fx Tax recommends that the M3 be populated indirectly using regular tax export codes (i.e., 01A). However, it is possible to export directly to the M3 override schedule, which will be described later.

Setting up Federal Tax adjustments:

When exporting to CCH ProSystem fx, all Federal Tax adjusting entries must be marked as either Permanent or Temporary.

Note: When using the 2007 tax season version for existing client files, all tax entries are set to Temporary. Please check existing entries and change to Permanent if applicable.

On the Account menu, select Adjusting Journal Entries.
Click New.
In the Type menu, select Tax - Federal.
In the Accounts menu, select Tax Export Code.
In the Difference menu, select either Temporary or Permanent.
Enter adjustment amounts.

Updating the M3 schedule:

For CCH ProSystem fx Tax, the M3 schedule may be updated in two ways: indirectly via a tax export code (e.g., to the 1120) or directly via the M3 override schedule.

Updating the M3 schedule via a tax export code

CCH ProSystem fx Tax strongly recommends that, whenever possible, the M3 be updated via a tax export code.

Many tax export codes correspond to a line in the M3 schedule. An M3 option code provides further precision for assignment to the M3 schedule. These M3 option codes are consistent with those found in CCH ProSystem fx Tax.

The list of codes that update the M3 schedule can be found in the Tax Code List, which can be opened by clicking in the Tax Export Code column in the Working Trial Balance screen.

Codes that update an M3 line will contain a value in the M-3 Code column. If the M-3 Code is set to ***, then the default M3 line associated with the tax code will be updated. This M3 code associated to a tax code can be found by clicking Modify in the Tax Code List dialog:

To change the M3 codes associated with a tax code, a different M-3 Option Code may be selected in this dialog. For further information, refer to the CCH ProSystem fx Tax Help for the available M-3 option codes.

If a tax export code supports an M-3 code, then the Book, temporary, permanent and Book values for the M3 line will be populated based on the Book value of the tax export code and any temporary and permanent adjustments made to the tax export code.

Please note that, when adding user-defined sub-codes, the M-3 option code for the new sub codes will default to the main tax export code. You can change the M-3 option code assigned to the new tax sub-code. If a main tax code supports detailed line information (i.e., Export code 10 ”r;Other income”), then the M-3 option codes assigned to sub-codes (i.e., 10.01) will be exported to CCH ProSystem fx. However, if a main tax export code does not support detailed line information (i.e. Export code 01A ”r;Gross receipts or sales”), then the main tax export code will be used for all sub-codes.

If you do not want to a tax export code to update any lines on the M3 schedule, select ’r;X’ as the M-3 Option Code.

Updating the M3 schedule directly

Working Papers also allows you to export to the M3 override schedule directly. However, CCH ProSystem fx recommends that whenever possible, the M3 schedule be updated via a tax export code.

To export a Book value directly to the M3 schedule, assign an M3*A code to an account in the Working Trial Balance screen. For example, to export the Book value of account 112 to M3304 ”r;Gross foreign distributions previously taxed”, assign M3304A to the M3 Code column of account 112.

Temporary and permanent adjustments may also be made directly to the M3 schedule using an M3 tax code.

Create a Federal Tax adjustment as previously described and set the Accounts menu to Tax Export Code. Select an M3*B or M3*C code depending on whether you wish to export to the temporary or permanent difference column of the M3 schedule.

Note: When an M3 tax code is encountered, the Difference (temporary or permanent) specified in the Adjusting Journal Entries screen is ignored. The column in which an adjustment appears in the M3 schedule is determined solely by whether the adjustment is posted against an M3*B or M3*C code.

M3 setup errors

Because of the indirect and direct methods of updating the M3 schedule, attempting to update an M3 code using both methods will yield an error during the export.

For example, suppose line M3318 of the M3 is updated via tax export code 12, using M-3 option code DC ”r;Deferred compensation”. It is then an error to attempt to export either a book value directly to M3318A or to export an adjustment directly to M3318B or M3318C.

Such a setup will result in unpredictable results and will be flagged as an error during the export process.

Creating a CCH ProSystem fx export file:

After these settings have been put in place, you can now create a CCH ProSystem fx export file. Please refer to CCH ProSystem fx Tax for step-by-step instructions.