Today's Technology for Tomorrow's Firm.
Issue link: https://cpapracticeadvisor.epubxp.com/i/411648
November 2014 • www.CPAPracticeAdvisor.com 7 TAX DOCUMENT AUTOMATION SYSTEMS Reviews AUTOMATION: The Key to Tax Season Effciency By John Higgins, CPA.CITP L ife can be funny. Tere are times when no mater how much we are told something is bad for us, we ofen ignore the message and continue down our current path. Whether it is smoking cigarettes, excessive drinking, texting while driving, you name it, millions of people continue these destructive habits. Once in a while we hear about someone making the leap to "the other side" and abruptly stopping the destructive behavior. W hat causes them to make the change? In nearly every case it is because they have reached the point of "experience," whereby they realize through experience, that the benefts of the new behavior far outweigh the comfort of continuing with the past behavior. Some call this the point of enlightenment. Perhaps one of the best examples of this is when you are on a diet and exercise regimen and all of a sudden your waist line or dress size is one size smaller. Tat is a point of enlightenment of the benefts of the new behavior. So what does this have to do with tax document automation (TDA) sofware? As I reviewed the TDA solutions here, I couldn't help but to ask myself, "why doesn't every frm use a TDA solution?" I think it comes down to realizing the benefts of these tools through experience with them. I will provide you with a description all of the features and benefts of these tools and your challenge is to give one or more of them a try by running a few engagements through them. As you try them out, keep an open mind about what their full potential is to help automate your workfows. Tere are basically fve key features of these programs: • Document scanning and organization • Document review and annotation tools • Paperless tax binder work fow • Tax sofware integration and data transfer • Schedule D transaction detail automation Please realize that the feature set of the solutions reviewed here can vary signifcantly, so don't expect all of these features in every solution. Tat is why you need to read the individual reviews. Let's take a quick look at each review category to make sure you are up to speed on the concepts. Just keep thinking about your tax preparation process as these features are introduced. Document Scanning and Organization Tis is the core feature of TDA sofware. Accounting and tax professionals have been trying to "go paperless" en masse since the turn of the century. Te challenge has always been determining the best way to approach this. W hen it comes to 1040 tax documents, TDA sofware makes this a no brainer. You simply take client documents and scan them in with litle or no advanced organization and the sofware w ill create a well-organized PDF document w ith automatic bookmarks that optimize your efciency in moving through the documents in the preparation process. Te sofware will typically process an OCR (optical character recognition) conversion of the docu- ments which ensures your ability to perform full text searches of the documents and increase the accuracy of data extraction. Tis is a classic case of using automation to replace manual labor, which increases productivity and proft- ability. In addition, the TDA sofware will organize the documents consistently, so you will fnd that to be a nice by-product. You will have more consistent organi- zation of your 1040 work papers across all your engagements. Tis freshly organized PDF document is an excellent output back to your client, preferably via your portal. Tey will appreciate seeing how nicely you have organized their documents and hopefully they will use it as a guide the following year, to make sure they have provided all of the appropriate tax documents. Document Review and Annotation Tools Once you have the organized PDF document and are ready to prepare the tax return, the next step is to be able to review the supporting documentation and make notes and add tick marks along the way. So having good navigation and annotation tools are the key to success here. In my consulting work with practitioners, I can assure you that this is where the process can break down. Te beter the navigation and annotation tools, the more you will see the value of working with digital work papers. Alternatively, a lack of good tools will result in the decision to go back to your previous paper-based process. Te key features to look for here are your ability to add notes to the documents and keep a conversation thread on the note to track all the communications related to it, as well as its status. Te ability to add stamps, i.e. reviewed, approved, etc. and tick marks, i.e., checked, question mark, reference circles, etc. are important to allow you to mark up the document as if you were working with pencil and paper. A key feature to look for is whether or not you can use the annotation tools that are built into Adobe Acrobat, or does the TDA sofware provide proprietary annotation tools. Paperless Tax Binder / Workfow Guess what? W hen you go paperless with your tax documents, you no longer need your "red rope" folders, because all of your documents are digital. Tat's a good thing and a bad thing. It's bad because most preparers use the red rope as their primar y engagement management tool, i.e., if it's on the foor lef of my desk, it's next in the queue, if it's on the foor on the right side of my desk it's ready to be forwarded for review, if it's on my credenza, I am waiting for client information. You get the point! With digital docu- ments you never really have to move them, because everyone connected to the system knows where to access them. One of the key benefts of electronic work papers is the ability for multiple people to view them simultaneously. No more need to make photocopies. Te idea of a tax binder and workfow feature is to allow you to have a virtual container that provides direct access to all of the engagement work papers, rather than having to manually navigate to them in Windows Explorer. Rather than try to explain all the potential features in this category, a picture is worth 1,000 words. So I strongly encourage you to participate in a live demo from the various vendors to see how this feature works. Tax Software Integration and Data Transfer Te best way to describe this feature is "cool." Tis refers to the ability of the TDA software to locate specifc tax data in the source documents, i.e., W-2 wages and compensation, and then transfer that data directly into your 1040 tax sofware. Tink about that, taking data directly from what was originally a paper document and entering the data into your tax program for you. Te key features to look for in this category are: W hich 1040 software does it integrate with; What verifcation and quality control features are available, and; How far does it go in terms of the scope of data that can be transferred. Schedule D Transaction Detail Automation The requirement to show all of the capital gains transactions on the Schedule D can be very tedious, especially if you have to manually calculate the gain or loss on each individual transaction and enter them into the tax preparation sofware. Some of the TDA sof- ware systems will do all of that for you automatically by transferring the brokerage statement text to an Excel spreadsheet, which in turn can be exported / imported directly to the tax sofware. Tere are other features that distinguish the TDA solutions from one another, so it is important that you read the individual reviews and ultimately visit the vendor websites for more information and possibly a live demonstration. A properly implemented solution can provide a number of benefts including increased consistency, improved client service and increased productiv ity. But of course, it w ill require some "change" on your part. So see if you can reach the point of enlightenment with TDA sofware, as I discussed previously. ●