"create a powerful income tax process - how integrating asset
TRANSCRIPT
Case Study: Creating a Powerful Income Tax Process –
How Integrating Asset Systems Will Help
Presented by:
June 2008
2
Introductions
Susan Rich
Manager, Income Taxes, Pitney Bowes
Kelley Lear
Managing Director, Red Moon Solutions
Stephanie Malin
Product Line Leader, Vertex Inc.
3
Session Objectives
Current process and pains collecting, validating and reconciling fixed asset data with respect to the following areas:
– Domestic compliance– State tax compliance– Property tax– Audit response (e.g., RARs, Unclaimed Property)
ROI Considerations for Fixed Asset Automation
Discuss the integration Pitney Bowes will use going forward to streamline their process and automate using Red Moon Solutions® Fixed Assets Manager™ and Vertex® Income Tax Solutions - Domestic™
4
Who is Pitney Bowes?
World’s leading provider of mailstream solutions, a global provider of hardware, software and services that help its customers manage the flow of information, mail, documents and packages.
2007 Revenue - $6.1 B
Global expansion
Since 2000, Pitney Bowes has invested $2.5 billion in 85 acquisitions
Evolving tax department
– Domestic and International– Tax department personnel -
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Who is Red Moon Solutions?
Specialty Tax Software & Services Provider
– FAM™– LKEM™– PowerOLAP®
Founded by Jim Shedivy
– Andersen Partner in charge of Tax Technology Enterprises
– CIO for Andersen– Headed up Milwaukee tax practice
From 7 – 20 Years Tax Technology Experience:
– Ex-Andersen & Accenture employees – Senior personnel
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Who is Vertex?
Comprehensive family of products and services in sales, consumer use, value added, and income tax
30 year history in global tax management solutions
Thousands of customers worldwide in all major industries
Over 3,000 software implementations
Extensive ERP partnerships
Full range of Consulting and Data Management Services
Corporate headquarters: Berwyn, PA
European headquarters: London, England
InternationalU.S. compliance for foreign operations.
Training, Integration,Implementation
& Support Services
DomesticStreamlined income tax compliance.
Planning & AnalysisCalendar – Track obligation dates.Custom Reporter – Generates custom compliance reports.
Consulting Services
Global ProvisionAutomated calculations and
scenario development.
Income Tax Suite of Solutions
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BEFORE: Fixed Asset Workflow
Book Type Setup
Foreign(Great Plains)
LS
TaxVarious Accounting & FA Sub-Systems
Initial Asset Entry(Detail)
Asset Additions &Retirements
Asset Data Files(XLS)
Property by State(XLS)
JD Edwards
Quarterly Provision
(XLS)
Provision.xls
Manual breakdown,
allocation and manipulation
PTMSProperty Tax
PeopleSoft
LMS
QAD
SAP
Asset Data Files(XLS)
Vertex Domestic Compliance
(Manual Input)
CORPTAX International Compliance
(Manual Input)
Estimated Payments
(XLS)
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Fixed Asset Challenges
Different fixed asset systems and many acquisitions
– SAP– JDE– PeopleSoft– QAD– Disposition tracking challenges– Summary asset information– Reconciliation
Domestic Compliance
– Manual data entry– Time consuming – combining SAP & FAM
data– Extensive detailed review required
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Other Tax Areas Affected
Property Tax
– Data Imports from SAP– Some manual process for JDE and QAD
entities– By location – down to the street address
Audit Defense
– Current audit exposure – need detailed depreciation by location for each asset
– Manually tracked in Excel– Would like to show leadership tax savings
through audit defense efforts– Trouble getting data out of their data
warehouse for tax compliance and audit defense
10
Fixed Asset Roadmap - Today
TODAY
FUTURE
• Standardized on FAM for acquired companies
• FA data input/import for tax depreciation data
• FAM generates 4562, 4797, 4684, 6254 and input in summary into Vertex Domestic
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Asset Management Challenges
Burdensome controls due to Manual Processes
– Requires detailed reviews– Many manual controls– Extremely time consuming– Reconciliation
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Potential Impact on Financial Statements
Incorrect profit & income tax– Mismatch of depreciation between book and tax
• Continued depreciation on books for disposed assets
• Domino effect on deferred taxes• Audit risk & credibility with auditors
Incorrect property tax– Unrecorded asset detail for classifying property
Incorrect insurance costs and inadequate coverage
– Paying for disposed assets– Missing new purchases
Poor purchasing decisions– Duplicate assets acquired
Poor SOX compliance– Inadequate controls and processes
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Financial Example
Number of Assets 20,000
Average Cost per Asset $1,500
Total Original Cost of Fixed Assets $30,000,000
Total Cost of Assets Lost or Unaccounted For
$4,500,000 15% of total cost
Assumed Corporate Tax Rate 39%
Estimated Federal Income Tax Overpayment
$514,800 1,320,000 X 39%
Potential Property Tax Overpayment $103,950 3% of asset cost
Potential Insurance Overpayment $33,000 $1 per $100 rate
Total Loss Per Year $651,750
Incorrect information and errors in fixed asset inventory data are a near universal problem – resulting in significant and unnecessary tax overpayments of 8% to 20%
- Asset Management Resource
(AMR)
15
Fixed Asset Roadmap - Future
FUTURE
TODAY
• Consolidate all acquisitions on FAM
• Import tax data
• Provision Data Integration
• Tax System Integration
• International data for 1118
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AFTER: Fixed Asset Workflow
FAM – Tax Depreciation Calculations and Tracking
Generate & Integrate
Provision TaxStream™
Vertex® Income
Tax Solutions– Domestic
Compliance™
FAM™
International Compliance – CORPTAX™
Import
Book Data
ALL Filings –
4562, 4797, 4684 and 6254
Provision TaxStream™Provision
TaxStream™General Ledgers
FutureAcquisitions
XML E-File Aggregated File
Int’l Data–
1118
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Leverage, Expand, Improve, Support
Consolidate systems where possible
Streamline
– Reconciliation and reporting– Property by location– Data integration– Workflow– Audit cycle
Integrate where it makes sense
Get Out of Your Comfort Zone – Minimize Excel Use!
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Streamline workflow
Reduce manual steps
Integration– Automated process for moving FAM™ data
into Provision– Automated process for moving GL data into
FAM™– Automated process for moving data from FAM
into Vertex® - Domestic ™– Automated process for moving data to
CORPTAX® International Compliance™
Reconciliation reports
– Detail– Summary– Excel
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Leverage Technology
Certified Development Partners
Form data exported from FAM™ and imported into Vertex® Income Tax Solutions - Domestic™
– Form 4562– Form 4797– Form 4684– Form 6252
1118 – International Compliance Data
Vertex® Income Tax Solutions - Domestic™ then validates and creates all filings consolidated within efile XML and transmits to IRS
1. Fixed asset data is brought into Fixed Assets Manager
2. Fixed asset data is exported out of Fixed Assets Manager
3. Fixed asset data is imported into Vertex® Income Tax Solutions - Domestic™
4. Tax forms are generated annually in Vertex Domestic Compliance
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Integration Demonstration
Red Moon Fixed Assets Manager™ (FAM) to Vertex® Income Tax Solutions - Domestic™
Simple export and import
Easy to do
Easy to learn
Data controls….
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Benefits & Value to the Tax Department
Flexibility
– Ability to react quickly to changing business needs
– React quickly to new acquisitions– Ability to work fast to supplant changing
workforce
Time - $$$
– More tax team time to analyze and maximize tax positions
– Increase cash flow – Goal to reduce effective tax rate (resulting in
increased book income)– More challenging work assignments – Tax savings reports– Better work-life balance
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Evaluate Your Fixed Asset Process
Consider Regardless of Vendor:
– Accounting book to tax– Tax depreciation book to provision– Tax depreciation - domestic, international,
and state compliance – Property tax– Planning– Audit response and defense – Look at overall controls
Cost/Benefit
– Export/Import – Tighter and more accurate integration– Alternative reporting tools
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Return on Investment - ROI
Please see ROI handout
Consider IT and tax team time to extract data from accounting or other systems
Consider tax team time to reconcile data
Consider points of re-keying – time and potential error rates
Consider downstream tax effects – across all areas
Consider audit risk
Consider over and under payment of property tax and insurance
Thank you for joining us todayIf you have additional questions or for more information, contact us at:
Stephanie Malin
(484) 595-6128
Kelley Lear
(941)379-7108
Susan Rich
203-351-7653