Is tax technology worth the investment?

Digital transformation has opened the door to seemingly unlimited opportunities for innovation in the tax and accounting industry. Workflow challenges that were once thought to be standard burdens of tax work can now be resolved due to tremendous breakthroughs in automation. However, many firms that built their reputation on steadfast consistency are still unsure if technological investment is worth the financial risk.

The industry is reaching an impasse where tax practices can no longer afford to be complacent. Rising expenses alongside a shrinking labor force have made it difficult to sustain the profit margins and business growth that firms have enjoyed for years.

Investing in tax technology now represents more than a situational advantage for certain firms. Today, it’s a sensible and necessary business decision for any tax practice hoping to stay productive and competitive long into the future. Implementing the right digital solutions helps firms increase profitability by improving workflow efficiency without adding staff. Spending less time per return creates the capacity for firms to accept more work and grow their practice.

SurePrep leads the industry in 1040 tax automation and optimization. Our solutions automate preparation, reduce review time, and streamline client collaboration so firms can turn improved efficiency into calculable profitability. Our solutions — TaxCaddy, 1040SCAN, and SPbinder — help firms achieve higher profit margins in the following ways:

• Preparing more returns without adding staff
• Consolidating software-as-a-service (SaaS) applications
• Reducing administrative costs
• Allowing firms to shift their focus toward advisory work

The technological edge we’ve established over our peers, combined with our sustained innovation, make SurePrep one of the best investments for any firm’s 1040 tax process. Our solutions have helped firms of all sizes produce significant returns — and we have the data and testimonials to prove it.

How saving time and resolving staff constraints result in profit

In the past, accounting firms would naturally respond to increased workloads and clientele growth by hiring additional staff. However, recruiting quality talent has become progressively more difficult in recent years as the labor supply has shrunk dramatically.

In 2021, the industry saw a 17% drop in the number of accountants and auditors from just two years prior, according to Bloomberg Tax analysis. The number of CPA Exam candidates also hit a 17-year low in 2022, according to AICPA’s annual report, indicating that incoming staff won’t be able to supplement the industry’s ongoing exodus.

Due to these trends, qualified tax professionals have become a premium commodity many firms are struggling to attract and afford. Some tax practices facing this predicament are left weighing two unappealing options:

1. Forcing significant workloads onto their limited staff and fostering an exhausted, unhappy workplace culture
2. Turning down new work or potentially even letting clients go to sustain manageable workloads

Although these firms might not realize it, there is a third way to resolve workload compression — automation. Adopting advanced digital solutions can enable tax practices to accept more work without hiring additional staff or contributing to burnout.

Most skepticism surrounding technological investment derives from its perception as an expensive luxury. But compared to the cost of hiring additional seasonal or full-time staff, even top-shelf solutions can present a more affordable alternative.

SurePrep has helped firms surpass financial projections by saving time for every participant in the 1040 tax process. An internal study from 2021 showed that SurePrep’s solutions resulted in an average of 1.59 fewer hours spent per return. Based on the average billing rate at the time of the study, that would result in $293.46 in potential savings on an average 1040 tax return.

With hours filtered by role, the study showed a 7% time savings for admins, 32% time savings for preparers, and 29% time savings for reviewers. SurePrep makes that possible at each phase of the 1040 process.

How TaxCaddy saves administration time

Saving preparer and reviewer time is a top priority for most firms undergoing change management. However, admins are often an afterthought in workflow discussions.

Nevertheless, administrative staff also play a pivotal role in the 1040 tax process. They oversee work that directly impacts how soon preparation can begin and how quickly invoices are paid. Clinging to a paper-based workflow with piecemeal gathering and delivery isn’t just confusing for clients; it’s also less efficient for admins.

TaxCaddy consolidates the entire taxpayer-admin collaborative experience into one cloud-based application. Your admin staff oversees the following responsibilities within a single platform:

• Document gathering
• E-signature collection
• Tax return delivery
• Invoice payments

TaxCaddy also uses the proforma data in your tax software to auto-generate document request lists (DRLs) at scale. This capability saves admins from painstakingly creating DRLs for each client or, worse yet, assembling entire paper organizers by hand.

How 1040SCAN saves preparer time

Preparers are educated and trained professionals with tax expertise that significantly affects their salary negotiations. However, they often spend a considerable bulk of their time on entry-level duties like inputting data, assembling work paper binders, and verifying the data extracted from optical character recognition (OCR) for accuracy.

Automating these tasks with scan-and-populate solutions is the answer. This approach not only lowers the excess hours billed during the busy season but also allows preparers to contribute in elevated roles that simplify the jobs of managers and partners — and yield greater profits.

1040SCAN’s best-in-class automation makes it the most powerful preparer assistant on the market. Here’s how it eliminates far more data entry, work paper organization, and data verification than alternative solutions.

Data entry

1040SCAN automates 4 to 7 times as many documents as the alternatives. This list includes grantor letters, 1098s, and State K-1s. 1040SCAN also extracts data from minor fields in source documents that other scan-and-populate solutions can’t read, such as margin interest, investment fees, and foreign income.

Bookmarking and indexing

1040SCAN automatically bookmarks and organizes workpapers into a standardized index tree so your staff doesn’t have to. Each work paper index follows the flow of the tax return, making them easily navigable for preparers in SPbinder, SurePrep’s work paper management system. Your team doesn’t even have to worry about late document submissions — they can submit additional workpapers to the same binder at any time.

Auto-verification

All OCR data should be verified for accuracy before exporting it to tax software. Other scan-and-populate solutions require humans to validate all extracted data manually, but not 1040SCAN. As of 2023, our patented artificial intelligence (AI) and text-layer matching automatically verify OCR data on 65% of standard documents. The list of documents recognized by our AI engine continues to expand with each tax season, meaning the auto-verified percentage will keep going up.

Since 1040SCAN’s auto-verification functionality was rolled out, SurePrep’s internal data has shown that the average cost per page dropped 25% from the year prior and 40% over a four-year period. Despite increasing hourly rate conditions, this study showed $975,000 in annualized savings from reduced labor expenditures.

How SPbinder saves reviewer time

Reviewers bill time at a higher rate than preparers and admins, making review the most expensive phase of the 1040 tax process on an hourly basis. SPbinder reduces review time by enabling detailed work paper preparation at the staff level.

While most work paper management systems are designed for trial balance engagements, SPbinder gives preparers 1040-specific tools to document a more complete work paper binder. With SPbinder, preparers are equipped with tick marks, annotations, collaborative note threads, OCR calculator tape, and hyperlinked cross-referencing that can be applied across all file types.

On the reviewer's end, SPbinder provides up to four role-based sign-off levels so partners and managers can easily track changes. SPbinder’s digital lead sheets also gather all final amounts into one place so users can perform a seamless top-down review.

You might recognize that this proposed workflow model adds more time to work paper preparation. However, your profit margins still come out ahead. Consider these two factors:

1. Preparation time is still shorter overall due to automated data entry, auto-verification, and automatic work paper organization with 1040SCAN.
2. Even if your preparers spend more time inside the binder, the resulting decrease in reviewer time yields an overall cost-saving return.

How 1040 tax automation creates advisory opportunities

Servicing a high volume of 1040-exclusive clients doesn’t represent the most profitable business model for tax practices. Firms typically see greater revenue by providing a wider range of services for a narrower client base.

Research from Intuit’s Taxpayer Insights & Intelligence Brief 2022 indicates clients want more guidance from their tax professionals. The majority (83%) of respondents indicated they would prefer to receive year-round tax advice in addition to filing their annual returns, and 79% indicated they would be willing to pay extra for these services.

Accountants across the globe seem to be aware of this opportunity based on a 2022 survey from Spotlight Reporting. Nearly 80% of respondents indicated that they planned on establishing or expanding their advisory offerings in the future. According to the study, lack of time and headspace was one of the many roadblocks preventing firms from taking action.

SurePrep solutions minimize the time firms must spend on 1040s by automating preparation, reducing review time, and streamlining taxpayer collaboration. Gaining the bandwidth to concentrate on advisory services helps firms generate a steadier influx of revenue throughout the year and develop more long-term, fruitful client relationships.

How digital technology reduces administrative expenditures

Individual administrative costs might not seem imposing on their own, but accumulated year over year, minor charges can begin to add up. Think of how much a fully paper-based firm spends per year on paper, ink and toner, postage, envelopes, pens, file cabinets, and storage space. According to Boomer Consulting Inc., the average cost of a single paper binder was $15 to $20 in 2019, before inflation.

Implementing an end-to-end digital process all but eliminates these expenses. Printing, scanning, and mailing are no longer necessary when every participant, including clients, collaborates in the cloud. Eliminating paper also promotes efficiency and flexibility. Authorized users can access digital binders from any location and pull up specific information with a quick search.

The ability to work from anywhere has even enabled certain remote and hybrid firms to downsize their office lease or do away with a central office entirely. This shift exemplifies how the cost of entry into the digital space pales in comparison to the opportunities it presents.

Avoid SaaS sprawl

According to a 2021 report, companies use an average of 254 SaaS apps, with each team using between 30 and 40 apps. Although digital transformation has become essential for modern businesses, implementing applications carelessly can have negative consequences. Aggressive adoption without proper vetting can lead to crowded tech stacks with redundant functionalities and unused solutions. Experts refer to this phenomenon as “SaaS sprawl.”

Consolidating your tech stack into fewer applications reduces clutter and helps save on licensing costs. For example, TaxCaddy condenses the entire taxpayer collaboration experience into a single cloud-based platform. Online portal users, however, must gather documents, collect e-signatures, send invoices, and maintain communication on separate applications.

Carefully investing in well-integrated solutions can also reduce friction when switching between programs. SurePrep solutions integrate seamlessly into the Thomson Reuters tax suite, so firms can manage their entire 1040 workflow without using third-party applications.

Implementation and support

Even though technology reduces dependency on manual labor, it contains an essential human element. The quality in which tax solutions are implemented and maintained directly correlates with their effectiveness. That’s why SurePrep operates as a partner — not a vendor — to firms. Here are several ways that SurePrep ensures success for its customers:

Account management. Our Success Team works with you every step of the way to ensure successful implementation. Even after onboarding is complete, a dedicated account manager will continue assisting your firm with anything related to SurePrep.

Support. All SurePrep customers receive unlimited year-round support. Our Support Team is available via phone, email, chat, and video call and holds a 98% customer satisfaction rating.

SurePrep Academy (SPA). SurePrep customers have unlimited access to our on-demand e-learning platform, SurePrep Academy. Onboard new staff easily and provide refreshers for existing staff with hands-on, interactive learning modules.

SurePrep Help Center. Need an answer fast? SurePrep maintains an expansive library of knowledge articles with detailed product information and troubleshooting steps.

Since 2002, SurePrep has helped firms of all sizes implement 1040 tax automation technology. We craft a custom training and onboarding program for every client. Whether you’re a national firm, a mid-sized practice, or a small office, our onboarding and support resources will scale to meet your needs. Our goal is to make your digital transformation an exciting and friction-free experience.

Perspectives around the tax and accounting industry

Although it’s our area of expertise, technological investment isn’t limited to the 1040 tax process. Some of the foremost industry authorities are reshaping every aspect of their tax business with transformative technologies. Let’s take a look around the tax and accounting space to see what forward-thinking professionals are saying and doing:

• According to Bloomberg Tax, three of the Big Four accounting firms are collectively investing $9 billion into AI and data analytics.
• A 2022 KPMG report on digital transformation showed 99% of executives reporting a positive impact on profitability and performance over the past 24 months.
• A CPA Journal study showed over 80% of respondents considering the reduced cost impact of tax analytics and automation to be “somewhat,” “fairly,” or “very significant.” Automating tasks was the primary application of tax technology among respondents.
• In a 2022 EY study, 53% of senior executives identified data analytics as their top investment priority over the next two years. This is a 50% increase compared to responses EY gathered in 2020.
• In a 2023 Intuit Quickbooks survey, 86% of respondents expect technology to drive their firm’s growth in the coming year. On average, they expect to spend $15,800 on technology improvements and upgrades during that time period.

Calculating your firm’s technology ROI

Tax technology is no longer a luxury. It’s now a necessity. The productivity and growth you enjoyed in years past may no longer be achievable with the same manual processes.

Fortunately, digital solutions have never been easier to implement and scale. Over 23,000 tax professionals use SurePrep solutions, ranging from the Big Four to sole practitioners. On the client side, TaxCaddy is home to over 250,000 taxpayer accounts and over four million document submissions.

But every firm is different. Each tax practice has unique staffing, workload demands, clients, and infrastructure that would result in a different return on investment.

To get a clearer idea of how much money SurePrep could save your firm, you can schedule a consultation with a SurePrep product expert.