Using Software Intelligence to Level-up International-through-State Reporting
Brother International Corporation’s (BIC) 2020 compliance season revealed inefficiencies the tax team needed to address. They manually updated Form 1118, Schedule H, Part II (interest expense) via User Expense Ratios to reconcile back to an external worksheet. This required:
- Manually updating the expense ratio for interest expense for every change to the domestic calculation
- Manually updating an external Excel spreadsheet, which maintained their Tax Basis Assets with links to other external workpapers
Also, BIC relied on legacy Forms 5471, 8992, and 8993 which required heavy manual intervention to prepare, as well as update, when changes were made to related data. The same could be said of BIC’s process for populating federal M adjustments and Form 4562—the process was manual and unresponsive to change. Without safeguards in place to prevent and detect irregularities caused by human error, BIC faced added risk.
Further, a lack of centralized import capability across all states and entities meant manually entering state apportionment and modifications, also raising the risk of errors.
CSC Corptax® International Compliance, State Compliance, and Office allow BIC to streamline their 2021 compliance processes. They find the solutions “intuitive, easy to use, and logical” and appreciate the “clean audit trails.”
Now, BIC maintains their Tax Basis Assets in Corptax to work in conjunction with their external workpapers. BIC updates the Tax Basis Assets every year with appropriate M adjustments during domestic compliance preparation. This automatically updates Form 1118, Schedule H, Part II with any changes on the domestic side and eliminates the need to update User Expense Ratios for interest expense.
Using NextGen Forms 5471 and 8992 produces impressive time-savings as the team effortlessly updates them with data already in the system. Similarly, by automating federal M adjustments and Form 4562, BIC reduces risk associated with their former manual process and gets time back to focus on reviews. They also appreciate the ability to easily analyze clean reports and diagnostics. And by performing their complex FDII calculation in NextGen Form 8993, they gain added assurance that their external FDII calculation agrees with the system’s calculated FDII deduction.
Instead of manually entering state modifications on to the return, BIC uses Corptax-provided templates to instantly import modifications and apportionment into the system via Corptax Office. They simply pull down their source data, create a formula to push it into state templates, and import to Corptax at the push of a button. The tool automatically pulls all prior-year modifications across all states and entities and provides a comparison to ensure consistency and completeness.
All told, this 4-person tax team estimates they save:
- 60 hours by automating modifications and apportionment data
- 60 hours by utilizing NextGen Forms 5471, 8992, and 8993
- 20 hours by automating federal M adjustments, M-3 amounts, and Form 4562