Amelio

Tax Preparation – Time to Go Back to the Future?

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The movie Back to the Future was released on July 3, 1985.  To commemorate the 30th anniversary, the movie was re-released on October 21, 2015 in an event publicized as “Back to the Future Day.”

This got us thinking about where the accounting profession was in 1985. Specifically, how were core tax and audit processes administered and managed?

Thirty years ago the primary tools for tax return preparation and tracking were legal pads, calculators, and a good supply of sharp pencils. For the younger accountants out there (those who have no idea who Alex P. Keaton is), the requirements back then were much fewer and the forms preparation less complicated. Accountants could generally prepare and track returns manually without major

Fast forward to today. Tax return preparation is much more complex from a regulatory standpoint and there are more activities – engagement letters, increased state filings, preparation of estimates and projections, foreign filings and much more.

The good news is the pencils, legal pads and calculators have been replaced by a host of applications and technologies – some very sophisticated – to support the tax preparation process.

So what’s the bad news?

The pencils, legal pads and calculators have been replaced by a host of applications and technologies – some very sophisticated – to support the tax preparation process.

If you are like most CPA / Accounting firms, it’s likely your tax prep process is supported by multiple, non integrated applications – leading to silos of information.

The impact of the “siloed out” approach is huge productivity gains in some areas due to great purpose built technology but it also creates huge issues with tracking what’s happening in the process and requires much higher IT support due to the lack of integration.

Despite the significant investments in technology we’ve all made, simple, important questions like what’s the status of the return and did we complete all the documents are difficult to answer.

So are we advocating CPA firms to take their tax prep process back to the future? No. Pencils and paper are not the answer.

We do think there are a few areas a firm can focus on that offer great opportunities for improvement.

  1. It’s called off the shelf for a reason. There is no shortage of off the shelf tax preparation software available for purchase. Most of them very good – but be realistic in what you’re getting. These packages must be somewhat rigid to meet the widest variety of needs. It’s likely these solutions won’t deliver the tracking the way you need. It’s also likely if you attempt to customize the package you will be creating downstream issues you (and your IT folks) don’t want.

Rather than jamming a square (tracking) peg in a round hole, you need to find a better way to meet your tracking needs.

  1. Understand your tax prep workflow. In multiple system / solution environments workflow is always an issue. Always.

Get your arms around your workflow – to the lowest level of detail you can – and document it. Once you do this you find ways to streamline and even automate it more effectively.

Why drive a compact car when you can cruise in a Delorean?