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Jumpstart tax preparation with an intelligent tech strategy
Taxes are the lifeblood of many accounting firms. However, tax workflows have historically suffered from cumbersome, manual processes. A rapid evolution in tax preparation technology promises a more efficient set of systems, requiring fewer resources to turn out high-quality work, enabling firms to take on more clients and provide them with better experiences.
Well-functioning systems also make accounting organizations more attractive to potential staffers interested in working for tech-savvy operations. To put these systems in place, firms need to identify, implement, and integrate new technologies across their entire workflow, from gathering client information to filing returns.
In June and July 2024, Arizent — the parent company of Accounting Today — conducted a survey on behalf of Thomson Reuters among accounting firm employees directly involved with tax service strategy or work. The results point to significant opportunities to streamline operations, particularly during the gather phase, which could significantly improve organizations’ ability to implement and grow their tax business.
Tax strategy remains at the core of accounting operations
For accounting organizations of all sizes, tax preparation has long been a foundational part of their strategy — providing a vital source of revenue while also creating opportunities for cross-selling advisory, planning, and other services. To support and grow this critical part of their business, more than half of firms expect to increase prices, expand their client base, and integrate new technology within their tax preparation practice in the next three years.
Attaining that growth may prove difficult as firms confront a variety of headwinds. Chief among those challenges is attracting and retaining talent, an issue nearly half (46%) of firms cite as a primary difficulty for their tax preparation practice. Unfortunately for the industry, fewer students are choosing to study accounting — partly due to the notorious stress of tax season and the ongoing availability of opportunities in other finance or technology occupations.
At least a third of accounting firms also face challenges growing their tax practice, including finding the time and resources to accomplish higher-value work, difficulties pricing their products appropriately, and effectively attracting and retaining quality clients. All these challenges point to a need for greater productivity. If firms could complete the tax preparation process more efficiently, they could free up resources to do the kind of work required at prices acceptable to accounting firms and their clients. Technology can enable this needed productivity. However, 33% of firms cite an inability to keep up with technological advances as a challenge in and of itself.
Tax workflows continue to produce bottlenecks
The clearest targets for productivity gains are the elements of tax preparation workflows that take more time than they should. Specifically, accounting firms most frequently cite gathering client inputs and preparing returns as areas that occupy considerably more time than they think they should (see Figure 1).
It’s not hard to imagine why. Clients see providing tax documents as a chore, often putting the task off until March and forcing firms to pursue missing items. Many existing systems use laborious, manual processes for managing workpapers and populating forms.
Notably, larger firms are more likely than smaller firms to report challenges with aspects of their tax business, suggesting the lack of productivity in current workflows gets amplified as the number of returns being processed rises. This makes sense; obtaining, organizing, and employing data to produce large numbers of returns during compressed time periods can require significant resources — especially when principal elements of the process require manual data entry and manipulation.
Despite some technology implementations, manual pain points remain
Firms are slowly turning to technology to improve productivity during tax season, but implementing that technology remains uneven and incomplete. Currently, less than half (44%) say they proactively leverage technology to enhance their business. Large numbers still use basic tools like spreadsheets — or even resort to pen and paper for various parts of the process (see Figure 2).
Deploying automation piecemeal may not produce the results firms expect because they rely on inputs from other parts of overall workflows where manual processes persist. “Tax workflows are only as streamlined as their most cumbersome step,” says Zac Meyer, Vice President of Product Management at Thomson Reuters. “The more automated and integrated processes become across the end-to-end workflow, the better and more accurate the results are likely to be.”
Start with step one for a more streamlined tax process
Some of the most prevalent productivity issues in the tax workflow start at the beginning of the process. The first element of preparing returns — the gather phase — represents a major time sink for most firms. Pulling information from various sources into a format that can drive work paper flows is often manual and, therefore, highly prone to human error. As advanced as preparation workflows have become, the shoebox full of receipts has, in many cases, simply become a digital shoebox full of uploads.
Few firms have implemented technology that automates work paper organization and data entry into tax software, compiling workpapers into a standardized index for rapid review. Instead, preparers have to spend time inputting and organizing data. That’s all time they could better spend on higher-value work such as tax planning. Using technology like TaxCaddy to streamline the gather phase and integrate it fully with the preparation phase can help reduce resource requirements, improve accuracy, and produce a better client experience.
Gathering tools can prompt clients for the documents needed to process their returns, scan the information, and use it to populate whatever tax software accountants intend to use to prepare the returns themselves. These solutions can be user-friendly for clients; furthermore, many clients expect this kind of technology from the companies they work with — and not having them can be a deal-breaker.
Of course, tools such as these must be robust and well-integrated to produce accurate results and enable positive customer experiences. Many firms currently use a jumble of third-party services for file uploads, e-signatures, communications, invoicing, and tax return delivery. The lack of integration creates a confusing and disconnected customer experience, causing many clients to put off document submission and denying firms the information they need to complete returns efficiently. Scan-and-populate solutions also vary significantly from vendor to vendor in terms of flexibility and accuracy.
An integrated system with the right features, such as SurePrep 1040SCAN with UltraTax CS or GoSystem Tax, can provide a single location for clients to input data. This technology makes it easy for clients to import data from financial institutions, deposit documents into drives, and scan documents for upload.
A revamped gather phase becomes the foundation for an end-to-end process that extends through preparation, review, and delivery. With accurate information in the system, other evolving technologies such as AI-assisted research — like Checkpoint Edge with CoCounsel — and categorization become more valuable, provided firms can find tools trained accurately by subject-matter experts and exposed to extensive testing. The best of these systems can help answer both simple and complex tax questions quickly. They can also validate the results of various steps in the process, enriching outputs with citations and links to source materials.
“Improving the gather phase of tax preparation can jumpstart a firm’s progress toward a more streamlined and productive overall workflow,” says Meyer.
Conclusion
The right tax preparation software can help firms increase productivity and streamline operations. By integrating these software tools directly into their workflows, accountants can build a comprehensive process that assists staff through the preparation, review, and delivery phases. This automation starts at the beginning, during the gather phase, to ensure teams complete tasks easily and more efficiently, freeing up time and resources to deal with higher-value work.
Actionable steps
- Review your workflow for elements that take more time than you think they should, such as gathering client inputs.
- Examine your process to determine what remains overly manual and where you could fully implement technology.
- Consider tech that streamlines the gather phase and fully integrates it with the preparation phase.
- Make sure whatever you use is easy for clients to access and allows them to get you the information you need seamlessly.
- Tap into tested and verified AI-assisted research tech to get answers to critical tax questions.
Tools from Thomson Reuters like TaxCaddy, Checkpoint Edge with CoCounsel, SurePrep 1040 SCAN, UltraTax, and GoSystem Tax can simplify the gather process for clients and staff, provide valuable research assistance, eliminate tedious and error-prone data entry, and automate the repetitive tasks costing you money.
Tools to elevate your tax workflow from end to end
- TaxCaddy. This tool makes it easy to gather and share tax documents with your tax professional. It retrieves your 1099s, 1098s, and W-2s automatically. You can upload or snap photos of your tax documents year-round and store them with bank-vault-level security.
- Checkpoint Edge with CoCounsel. With this professional-grade generative AI assistant, simply pose your tax question and swiftly receive the most relevant answer, complete with citations from trusted experts and primary sources.
- SurePrep 1040SCAN. This leading 1040 tax preparation automation software automates 4 to 7 times as many documents as the alternatives. Its unmatched document automation coverage eliminates more data entry for your preparers than any other scan-and-populate solution on the market.
- UltraTax CS and GoSystem Tax. Our professional tax preparation software integrates seamlessly to streamline document gathering and tax return delivery for 1040s and 1041s.
Not sure which Thomson Reuters product is the right firm fit? To get a customized product match, take our fit assessment.
Methodology
Arizent — the parent company of Accounting Today — conducted this research online during June and July 2024 among 180 qualified respondents. To qualify, all respondents work in accounting firms that provide tax services, and the respondents have to be directly involved with tax service strategy or work.
About Thomson Reuters
Thomson Reuters is a leading provider of business information services. Our products include highly specialized, information-enabled software and tools for legal, tax, accounting, and compliance professionals combined with the world’s most global news service — Reuters.
About Arizent Research
Through full-service research solutions that tap into their first-party data, industry SMEs, and highly engaged communities, Arizent delivers actionable insights across banking, payments, mortgage, insurance, municipal finance, accounting, HR/employee benefits, and wealth management. They have leading brands in financial services, including American Banker, The Bond Buyer, Financial Planning and National Mortgage News, and professional services, such as Accounting Today, Employee Benefit News, and Digital Insurance.
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