For most firms, the busy season leading up to April 15 and the ensuing extension periods make for the most hectic, stressful, but fortunately profitable, times of the year.  While the volume of work cannot always be controlled, the way firms manage this influx of work can be drastically improved with today's integrated tax workflow applications.  Digital tax tools have automated virtually every aspect of tax production from how firms capture and receive client data, to how they prepare and deliver returns, while at the same time providing owners better oversight of every step of the process. 

Historically, firms moved files physically through the office and tracked production on control sheets and manual lists that took significant time and effort to update.  Since files could easily be misplaced, additional lists were created to monitor due dates and other production information that could only be accessed by the person maintaining the list.  Some firms put their check lists on spreadsheets and utilized the due date capabilities of their practice management, and others stored digital copies of returns in their document management database, but these separate systems tended to automate individual steps of the traditional tax workflow, rather than integrate them to take advantage of current digital capabilities.  

This all changed with the advent of the Indian outsourcing companies that built systems to automate the lower value keypunching at the front end of the tax production process.   While many firms already were using Citrix/WTS to review returns or physically e-mailing them to other offices, they did not have an integrated tax workflow system to tell them the status of the return, status of questions, status of due dates, etc.  These were all separate items that firms did not manage well until the advent of tax workflow that integrated the document aspects, communication aspects, and due date needs.  

To coordinate the efforts of dispersed personnel in multiple locations scanning, inputting, reviewing, and responding to questions, required that the entire process be automated into a single screen that could be accessed regardless of time or location, which is what multiple outsourcing companies such as SurePrep, Datamatics and XpiTax created in the past few years.  Almost at the same time, accounting document management vendors realized that since they had the final archived documents and were beginning to capture scanned images of client supporting documents, they could automate the processes to manage the flow of the data through the entire system, …also within a single screen interface. (To clarify: Single screen refers to all data in a single application rather than having three or four different applications open, most firms today are actually going to three screens.) These processes have been fine-tuned through document vendors such as GoFileRoom and Doc-It and through outsourcing companies such as SurePrep and XpiTax (currently partnering with CCH ProFx).  Below, we describe the workflow processes that have been integrated to create today's best practices for electronic tax workflow:      

The real value of tax workflow systems is that every step of the process is updated within the same application that is available to anyone in the firm who is authorized to view it.  One application means a central interface, more standardized formats, and more easily focused training.  This information is then available to each user depending on their specific needs through an extensive series of customized reports.  The end result is that all the individual processes and checklists are consolidated into the same application that can be centrally managed and accessed from any workstation with access to the firm’s information system.   

·                  Data Capture: Firms must work to capture data at its root source in a digital format.  Most clients physically deliver documents to the firm, which can be electronically notated in the workflow system.  This status is updated in the same screen when the documents are scanned in and the status is changed to be ready for preparation.  The workflow tool can then notify the designated preparer that the return is available or placed in a queue for anyone to access.  

·                  Tax Return Preparation: During preparation, tax workflow tools allow the preparer to request additional information or document outstanding points, all of which is managed through the workflow tool.  As soon as a response or additional documents are received they are entered into the workflow tool so that the preparer becomes aware that the status has changed and can take the next step until the return is ready to review. 

·                  Review Process: Automated tax workflow tools [allow the reviewer to see all aspects of the return, quickly linking to images of source documents, emails, and comments.  This can be done regardless of location, allowing returns to be reviewed by personnel in other firm offices or even after hours from home via a secure Internet-enabled computer.  

·                  Completion: Once the return has been reviewed, the same tax workflow application allows administration to document the completion of the return including tracking the assembly, signing and delivery.  While most clients still receive physical documents, some tax workflow tools have integrated with document portals that allow a PDF copy of the client’s return to be posted to a secure site on the Internet and an email sent to the client to retrieve it.  Again, the workflow tools not only oversee the communications with the client, but also notify the firm when the client has accessed the return  

Integrated tax workflow is in its infancy and firms can expect to see ongoing enhancements now that all the information is in one database.  The advent of intelligent scanning tools such as CCH ProFxScan has streamlined the upfront process of organizing the client’s source documents into a bookmarked PDF document that significantly reduces the upfront organization time.  The next evolution of this is termed intelligent input, which will actually run optical character recognition software on scanned documents such as W-2s, 1099s, and brokerage statements, and place this information in the appropriate place on the tax return.  Once the scanned item has been verified, it is highlighted on the tax return in such a way that the preparers and reviewers do not have to double check the work.  With time, more and more client documents will become capable of being entered via intelligent input to the point where there will be no keypunching.  This initiative has been labeled “zero data entry,” and is on the radars of all the major tax application vendors.  It is expected that the first products will be on the market in three to five years. 

Now that the April 15 deadline has become a memory, it is imperative that firms understand current tax workflow tools that will further streamline their processes and optimize the capabilities of its personnel.  By evaluating and implementing digital workflow processes during the summer, firms will be able to take advantage of them for the extension season and have them fine-tuned for the following year.  _________________________________________________________________________ 

About the author: Roman H. Kepczyk, CPA, CITP is president of InfoTech Partners North America Inc., a consulting firm working exclusively with CPA firms on their internal technology utilization and their transition to a digital or “less paper” environment. He can be reached at roman@itpna.com.

This article is reprinted with the publisher's permission from the CPA Practice Management, Forum a journal published by CCH INCORPORATED. Copying or distribution without the publisher's permission is prohibited. To subscribe to the CPA Practice Management Forum or other CCH Journals please call 800-449-8114 or visit www.tax.cchgroup.com.