Today's Technology for Tomorrow's Firm.
Issue link: https://cpapracticeadvisor.epubxp.com/i/49996
TAX DOCUMENT AUTOMATION REVIEW SECTIONS Reviews For Your Firm CORE PRODUCT FUNCTIONS/FEATURES • Scan/Organize or Scan/Organize/Import • Forms supported/recognition routine • File formats supported/created • Ease of use in changing resolution, type of fi le, etc. • Re: Brokerage statements - support for creating Excel fi le of trades information & importing into many different tax returns • Direct import of data from fi nancial institu- tions? Tool/portal to support indirect delivery of downloads from fi nancial institutions? • Method for determining best input location for forms w/multiple places it can come in (e.g. 1099s)? Will it extract data from prep applica- tion & classify the same as last year? • How are errors handled & data verifi ed before import? • Scanning support for barcoding of K-1/ barcoded W-2s PAPERLESS WORKFLOW • Best practices document for scanner setup • Clear & easy to understand roadmap • How do organizers fi t into the process? • How are last minute documents processed/ handled? Additional charge w/late submis- sions? • Output options • Can organization structure be reconfi gured? • Used w/retail tax where return is prepared during review & delivered immediately after in-person interview? INTEGRATION • Where is DMS integrated into process? What DMS are supported? • Integration w/portals for client-scanned documents • How does tool integrate w/tax application? Are hyperlinks in Adobe linked to input screens? Drilldown from input screens to supporting documents? • Percentage of correct fi elds populated in auto input? Handles misc. or duplicates? • Locally installed or hosted? Max & min turnaround times during tax season? Uptime issues during busy season? • Interface or service to facilitate outsourced data correction or outsourced preparation? Onshore or offshore? Support for automated redaction? HELP/SUPPORT/TRAINING • Online resource center • Tech assistance availability/diagnostics for improving output? Certifi cation process to ensure scanner settings are optimized? • Consulting services available to optimize transition to new process? Cost? • Training to help fi rm mgmt. w/new model? SUMMARY & PRICING I OCR T e key technology behind each of the soſt ware packages covered in this review is Optical Character Recognition (OCR). From scanned images of tax documents, OCR converts the printed text into electronic data, which the tax document automation soſt ware uses to perform its other functions. The first of these functions is to auto- matically organize the tax documents, which some soſt ware packages put in a single bookmarked PDF fi le, while others drop them in a folder structure within an integrated document management system. T e second common function is to popu- late the text and numbers that the OCR derives from each source document into the appropriate input screens of a tax soſt ware. Some of these soſt ware packages off er a separate module to extract trades from brokerage statements and either export it to Excel or to Schedule D of a tax soſt ware. 6 January 2012 y 2012 • www.CPAPraCPAPracticeAdvisor.com n hypothetical man-on-the-street interviews asking tax practitioners what they wish they could spend more time doing, I'm pret y sure none of them would say, "I'd like to spend more time checking for qualified dividends or typing hundreds of capital gain transactions into tax soſt ware." I imagine that most of the responses would include value-added activities such as spending face time with clients, discussing tax strategies, and developing their tax practices. Many would like to work less and be able to spend more time on hobbies and recreational activities with family and friends. For a growing number of tax and accounting fi rms, today's tax document automation utilities act like a genie in a lamp, granting the wishes of accountants. Although a tax practitioner can't relax on the beach while tax returns magically complete and file themselves, these automation tools bring the profession closer to that accounting fi rm utopia than ever before. INDIRECT DOWNLOAD A relatively new service that some tax document automation soſt ware vendors are off ering is indirect download, which consists of clients providing passwords for online access to fi nancial institutions and other issuers of tax documents through a secure website maintained by the tax document automation vendors. T e vendor electronically collects the reported tax information and downloads it into the tax practitioner's tax software. Since this method is completely electronic and does not involve any scanning, it should achieve more accurate results and create a seamless process for preparing a tax return. While some fi rms and clients may have security concerns about indirect download, there are many fi rms implementing it successfully, and it may be a very common method of tax preparation in the future. EVOLUTION OF THE TOOLS Tax document automation utilities have dramatically improved over the past few years at a faster rate than other tax and accounting soſt ware. My fi rst exposure to tax document automation occurred when I at ended the AICPA Information Tech- nology Conference in June 2008. I recall a speaker in one of the sessions asking for feedback from at endees who had imple- mented tax document automation soſt ware in their fi rms. Understandably, the responses were mixed as tax document automation tools were in their infancy at that time. Since then, OCR technology has advanced in its accuracy and its programming to recognize a greater number of forms. Vendors that were revolutionary in the market have added features and integrations. Many practitioners are satisfied with how these tools have improved from year to year. Firms that evaluated tax document automation tools several years ago may be pleasantly surprised to see how they have evolved. However, it is important to have realistic expectations of what the software can accomplish. Although tax document automation utilities have dramatically 6 Effective Tools for Tax Document Automation progressed, they may only be able to get a tax return 80 percent complete, for example. Each of the vendors recommends that human eyes verify the amounts captured by the OCR soſt ware and ensure that they are properly reported on the tax return. THE PROCESS Successfully adopting a tax document automation product requires more than simply purchasing the soſt ware. A fi rm should invest in a good document scanner and make sure that documents are scanned at a good enough quality level for the OCR to properly read the text. T e "garbage-in, garbage-out" phrase certainly applies to the scanning step of tax document automa- tion. Firms will also need to map out new workfl ow procedures and processes. T e roles and responsibilities of both professional and administrative staff change when tax document automation software is implemented. Training staff to properly use the new hardware and soſt ware is key to making sure the tax document automa- tion train doesn't derail. PUT IT TO THE TEST If you are still skeptical of the eff ectiveness of tax document automation technologies, at least give them a try. Each of the products reviewed has some sort of evaluation version or a limited number of free uses. When testing, fi rms should use a variety of source documents with diff erent scan qualities to see how the soſt ware performs. Even though each falls just short of waving a magic wand that instantly completes tax returns without human eff ort, they provide timesaving tools that help many firms become more effi cient and profi table. ● By Dustin Wheeler, CPA