Now that the October 15 deadline has passed and the 2004 busy season is all but a memory, it is time for firms to turn their attention towards evaluating their current tax production processes and making adjustments to optimize performance for the next busy season, which will be in a heartbeat.  The accounting profession’s transition to a digital environment and new capabilities within tax applications provides firms with new opportunities which can streamline production and positively impact the firm’s bottom line.  This article outlines ten of today’s best digital tax production practices to consider before the New Year rolls in. 

1-PDF Tax Files: Firms should generate a PDF image of each final tax return rather than storing a paper copy, as this provides better access, delivery, and security at a lower cost.  Firms should also store an image file of supporting documents, so the complete tax file is digital.  When the information is needed in the future, it will be faster to access it online or print it out, than to physically locate it and handle it manually.   

2-Verify Backup Capacity:  Prior to rolling into another busy season, firms should ensure that their data backup systems have adequate capacity to quickly backup all data with minimum downtime of the network.  Digital files are significantly larger, so firms should evaluate the impacts of implementing redundant or newer, higher capacity tape drives, as well as archiving older and minimally accessed files to other media such as web-based providers, CD/DVD drives, or hardware appliances. 

3-Standardize Due Date Systems: In the past, firms utilized manual methods of tracking due dates ranging from hand-written lists to spreadsheets. Firms today should utilize the tools found within their practice management or tax application to track due dates so the information can be updated digitally when each task is completed.  The increased capacity of today’s computers and accounting applications allow all users in the firm to be in these applications at all times and generate reports in real time. 

4-Maximize Onscreen Capabilities:  Firms should standardize on dual monitors for power users such as those performing onscreen tax return review and billing.  The focus of reviewers should be on doing all that is possible to complete and “push forward” the return, rather than sending back the return for corrections, unless it is absolutely necessary.  While many firms will still utilize paper “source” documents for the review, all notes and changes are made online.  Duplicate monitors should be the same screen size and format, and while the majority of monitors today are in “landscape” mode, expect to see models in “portrait” mode in the near future, as they take up less desk space and show more of the return without scrolling. 

5-Invoice with the Return: For all tax-return only clients, firms should get in the habit of having a completed invoice go out with every return.  The majority of firms today bill based on the previous year’s invoice and add a small increase, yet create major administrative accounting processes to handle minimal charges such as collation/assembly time, e-filing, copies, printing, etc.  Firms should consider entering a fixed charge to cover all these administrative costs when the return is checked in, based on the return classification, and have an invoice provided when the return is to be signed, which the signer can either approve or modify.  Promoting collections at the time the return is picked up also minimizes the monthly billing process. 

6-Communicate Digitally:  Centralize all client email addresses so it is easy for preparers to ask questions via email or to inform clients of tax law changes electronically.  Emailing clients drafts of returns will shorten the approval time for e-filing and provide the client a digital version to store electronically.  Going to digital invoices will also allow the firm to email statements to clients, which delivers the invoice immediately, while at the same time eliminating administrative costs of printing, envelopes, postage and handling.  

7-Organize Tax Knowledge: All firms should have a tax page on their intranet, which documents current issues with accounting software and firm standards.  Tax engagement procedures, document templates, website favorites, and other best practices should be organized on this tax page, along with any custom forms, so it is easy for all personnel to go to one site for all tax information. 

8-Re-evaluate Tax Licenses:  Firms should have one primary tax research and forms application to minimize redundant costs and training.  In addition, for specialized programs such as tax projection applications or unique tax portfolios, firms should annually re-evaluate the number of licenses required for each program to verify the expense is justified for the number of clients it is used for.  For lesser used applications, there are a number of web-based applications that allow the firm to pay for usage only (and not have to administer or support the application internally). 

9-Standardize Support:  Firms should identify a primary and backup champion for each firm application and post this information on the intranet along with hours of operation, web site links, licenses or passwords, and any additional contact information that might be needed.  This list should also include support numbers for the building and office equipment vendors such that employees only have to look to one place for help with any issue within the firm. 

10-Re-Evaluate Support Contracts:  With today’s dependence on the network infrastructure for tax production, firms should annually review support contracts to ensure minimum downtime in the event of a disaster (including the updating of the firm’s business continuation plan). Discussions should be held with the firm’s network integrator to understand different recovery scenarios, as well as increasing support coverage during the busy season.  Also, as firms rely heavily on the Internet for email, tax updates, and e-filing, bandwidth contracts and redundant connections should be part of the annual evaluation process.  

Tax season will be here before we know it.  Firms should take the time now to re-evaluate their production processes and procedures to ensure they are optimized and standardized before the new season begins.