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Set clear guidelines for tax preparation source document delivery

Will Hill, MBA  Product Manager — Tax Professionals Advisory, Thomson Reuters

Will Hill, MBA  Product Manager — Tax Professionals Advisory, Thomson Reuters

How do clients know if they have submitted all the proper source documents prior to having their accountant start work on their tax returns?

In this episode of the Pulse of the Practice, “A New Tax Ready Experiment,” Paul Miller, CPA from Business by Design, and I discussed the challenges presented with digital tax source document delivery from customers.

A new system of accepting, tracking document drop-offs

Paul and I have discussed the process of clients submitting tax documents electronically many times over the past few years. It’s a growing challenge, knowing when a tax return is ready for you to start working on, and when a client is merely slow-dripping source documents and content to you, one at a time on a portal or via email.

Paul’s firm is trying a new method to streamline the process.

“One of the things that comes up most commonly as a frustration for my staff is getting information from clients,” he says. “Sometimes, doing a tax return can be very straightforward if you just can get the right information. It’s just that correspondence back and forth with a client, what do they need, etc.”

In Paul’s instance, he estimates roughly 75 to 80% of tax drops are done on a remote basis. Previously, a client would physically deliver the required tax documentation to the office. Now, most send their documents electronically, with information uploaded through a portal.

“The challenge when that happens is you don’t have the same kind of gatekeeping,” explains Paul.

When that was done in the past, customers would upload their information and were told to set an appointment. However, the process would slow down once the documents were reviewed in-office.

“What we’ve been finding is that clients are just not prepared to really have us do their taxes,” says Paul. “They don’t know for sure what they need to get, or their books aren’t ready, or whatever. We end up starting this, what we call, tax drop process way too prematurely.”

Creating faster tax source document delivery

To expedite the process, they recognized the need to educate their clients on how to become ‘tax ready.’ They wanted to be sure the clients were aware of what they needed to submit in order to start the process.

“When we set our tax drop, that’s when the clock starts ticking on what we can actually work on,” says Paul. “I think many people will know that you might have an appointment with a client, they bring a few things, that you wait a week or two, they get you a few more.

“Then, it’s been there a month and they’re wondering…where’s my taxes? You’re like, ‘Geez, you just got me this stuff two days ago I’ve been asking for.’ It’s really a challenge.”

What they’ve done at his firm is compile a checklist of what is needed for tax source document delivery, and let the clients know what is needed to make each client tax ready.

Instead of using traditional methods like organizers to get clients to submit their information (“Because most clients don’t fill them in. They don’t do anything with it,” admits Paul), they provide a punch list of items, and also send out videos to the clients to help with the process.

“When you are ready, then we can schedule a tax drop appointment, and then we can schedule how your return could be completed and picked up,” he says.

Are your clients’ books really reconciled and tax ready?

An issue arises with clients doing their own books. If an accountant needs some details, as Paul points out, he may ask if their books are reconciled.

“They have no idea what you’re talking about,” he notes. “’Yeah, I downloaded them from Wells Fargo. It should be all good. Everything’s in there.’ That just inherently starts the problem.”

Even though the client has downloaded what they think is all the information they need, it might not be categorized correctly, or not yet reconciled. That means there is still work to be done.

“If that client comes in thinking, ‘I’ve got my QuickBooks file, I need to get my corporate return done,’ and now you have another week or two of bookkeeping work just to get started on a return, that’s a problem,” says Paul. “We run into that more often now. What we’re trying to do, again, is educate the client that just because you downloaded data into QuickBooks doesn’t mean your books are ready.

“That just means there’s data sitting there.”

Creating a new tax drop-off strategy

I was curious with how this came together; namely, how Paul’s firm moved from developing to enacting a plan, in addition to educating their clients on their new drop-off process.

It turns out, drop-offs which were missing key pieces of information proved to be the common denominator.

“We talked about the business income and expense, their books and we talked about the tax forms they needed, tax payments that they might’ve paid, estimated payments or whatever,” says Paul. “Then, we talked about the couple of things on the personal side they might have, as far as other income and that kind of thing. Those are kind of the components we’ve started breaking it down.”

At the time of our conversation (mid-January 2020), Paul’s firm was still revamping and adjusting its final checklist, determining elements which need to be added or deleted. Through a bit of trial and error, they were making progress in the process.

Paul also mentioned how a video he was shooting would benefit the firm and its clients. By presenting a checklist of required items, the clients would be educated with how to arrive at the status of “tax ready.”

“As people start dribs and drabs of pieces of information coming in or whatever, we don’t want that appointment set for a tax drop until that accountant in charge feels like that client is tax ready,” he says.

Paul understands the process of tax source document delivery is ongoing. He believes his firm is comfortable educating its clients on the new process, which could benefit all in the long run.

“We’re going to continue to morph this process,” he says. “We’re going to learn a lot in the next two months as an example of what works and what doesn’t work. Then, what we’re going to do is continue to morph that process into something else.”

Listen to the “A New Tax Ready Experiment” episode of the Pulse of the Practice podcast on your preferred platform (Google Play, Apple, Spotify, Stitcher) or here.

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