Posted by Ed Jennings on Thu, Oct 29, 2009
In addition to "paperless tax workflow", another term that keeps popping up in the industry is "tax document automation."
What does tax document automation do?
As a tax practitioner, I'm sure you're familiar with the proverbial "shoebox" full of client source documents. Clients come in with a disorganized stack of documents, including IRS forms, receipts, and maybe even a take-out menu. They drop it on your desk and say "Here—you deal with this." Sound familiar?
If you haven't begun scanning tax documents before tax preparation, your next step would be to manually sort the documents into the order of the tax preparation process and use them for reference while you manually key the tax data into your tax preparation software.
With your new paperless tax workflow, your next step is to scan the documents into a PDF file. Here's where the tax document automation comes in. Tax document automation allows you to take that stack of client source documents, and scan them as-is into a PDF file to be automatically organized for you. No organizing the documents pre-scan, no leafing through the pages to make sure they're all facing the same direction, and no pulling out documents that are irrelevant to the tax return. All you have to do is pull out any staples and/or paper clips before scanning and you're good to go.
There are two basic categories of tax document automation solutions: scan and organize and scan and populate.
Scan and organize software automatically organizes, bookmarks, and labels the tax documents into a PDF file. The bookmarks are labeled with the name of the document issuer's/payer's name, and match the order of the tax preparation process, so you just have to click down the line of bookmarks to quickly find all the information you need.
Scan and populate software goes one step further to extract the tax data from the scanned tax documents and automatically import the data into your tax preparation software package. That's right—scan and populate software eliminates manual data entry. It also provides the organized, bookmarked and labeled PDF to cross-check the imported data.
Setting aside the obvious advantage of not having to manually sort through paper files (and the immediate drop in tax season paper cuts); there are some serious process and workflow benefits to using this kind of software. Tax document automation allows you to:
- Increase productivity by saving time finding, entering, and reviewing client data
- Standardize workflow with consistently-organized tax workpapers—no matter what order the documents were scanned in
- Hand off document organization to support staff—tax document automation software requires no knowledge of tax documents, making it easy for support staff to scan and upload documents
- Free preparers, reviewers, and partners to focus on value added activities
Now it's time to ask yourself: does tax document automation make sense for your tax practice? Read our free white paper, 10 Questions to Ask When Considering Tax Document Automation, to find out.