2008 Review of Tax Preparation Suites

From the April/May 2008 Issue

For many firms, annual tax compliance services represent the largest single
revenue stream, often amounting to more than half of their annual gross. Individual
return preparation, primarily involving clients who visit the office one time
per year, make up the bulk of these receipts.

With such an important part of their practice’s income at stake, many
professionals have been concerned with the perceived “commoditization”
of preparation services. That is, with the continued encroachment of online
do-it-yourself filing programs now even extending into business returns, to
many the profitability of tax services looks threatened.

If preparation services existed in a vacuum, if a professional preparer offered
only the same service as one of these programs, and if return preparation processes
stayed static, then that might be a just concern. But tax professionals offer
much more, in terms of both service options and the quality of those services,
and improved workflow processes continue to make practices more productive.

Of course, the value of professional preparation starts with training and
expertise, in addition to access to resources that can help clarify complex
situations. This year’s Congressional SNAFU with the AMT reminded many
consumers of how little they know when it comes to their taxes. But the value
of the professional runs much deeper, and professional tax compliance systems
have evolved greatly over the last few years.

Program developers once strived to provide accurate calculations and forms
libraries, and they achieved this — all tax systems are reliable in this
aspect. The vendors then turned their sights on maximizing the productivity
and efficiency of the professionals who use their programs. Each practice is
different, so to meet this challenge, the vendors have taken different approaches
to meet the unique needs of the types of professionals who use their programs.
This has resulted in new and enhanced features that not only improve and streamline
workflow processes for the professional practice, but also offer client service
and communication improvements.

For clients, one of the more visible of these added-value features also serves
as a continuation of a practice’s paperless office strategy: Online client
portals and data organizers. Giving clients online on-demand access to electronic
versions of prior-year returns and other documents is a convenience factor and
reduces the filing and storage requirements in the firm.

Integrated tax planning capabilities has also enhanced client service. Having
the ability to explain why a client’s return turned out a certain way
is a cornerstone of the tax engagement, but being able to proactively help them
reduce their exposure and liability is a tangible benefit the client can readily
see. For one-visit clients, this benefit can easily lead to an additional engagement
in the middle of the year to revisit their taxation issues and develop strategies
to help them. Some programs even offer client-ready reporting functions with
graphical elements to help explain current and projected scenarios.

Technological innovations in workflow processes have similarly enhanced efficiency
and productivity within practices, enabling tax offices to handle more returns
in less time while increasing managerial supervision and ensuring quality. Among
the most recent and most dramatic workflow innovations has been automated scanning
and form population tools that allow the professional or an administrative staffer
to scan a client source document, with the data flowing directly into a client’s
electronic folders for import into returns and then awaiting review. The first
of such systems debuted for TY 2006 and, in the intervening year, several vendors
have introduced similar programs. In our September 2007 issue, we will provide
a special section covering tax document automation systems.

Advanced integration between modules has also streamlined data entry by automatically
moving data between interrelated returns. For practices with partnership and
corporate returns, having K-1 data flow through to the appropriate individual
returns saves time, as does data sharing between parent/child returns.

Client communication tools, in addition to providing client-deliverable copies
of returns and reports, have been enhanced to include automatic generation of
client letters that can include pre-populated checklists or reminders of missing
data. This is an added value to both client and firm, as it reduces the number
of visits a client may have to make to the office, and also reduces the manual
compilation of notes related to missing client information.

Additionally, review processes have also been improved, decreasing the time
spent on the administrative part of the process, such as gathering workpapers,
which frees senior staff to provide more valuable services. Likewise, improved
diagnostics and research systems have grown to automatically alert users to
potential difficulties and give quick access to expert analysis of tax code.

The services that tax and accounting professionals provide clients goes well
beyond data entry and submission of returns, and the key to finding the best
professional tax compliance system is to find one with features that not only
help provide client service but also increase the efficiency and productivity
of the practice. These factors vary with each practice and their client base,
but the general philosophy does not: Giving clients what they need (not what
they think they need), and doing so in a way that maximizes firm resources,
enables the practice to be more responsive to clients and to be more profitable.

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