The Tax Professional’s Guide to a Paperless Tax Workflow

70% of Tax Professionals Scan Tax Documents—Do You?

If you had any doubt that “paperless” is sweeping the industry, our survey results may make you rethink your position. 

According to our annual tax season survey—to which we received more than 850 responses—70% of those surveyed are scanning tax documents at some point during the tax preparation process.  Perhaps more surprisingly, only 10% had no plans to scan tax documents at all, with the remaining 20% considering it for the future.

So what’s so great about digital documents?  Why is the industry moving in this direction?

Converting paper files to digital workpapers has several benefits.  The first advantage most think of is the elimination of paper filing and storage.  That’s definitely true—but there’s more to it than that.  Consider that scanning also:

• Facilitates firm-wide access to client documents via network or internet connection during preparation and review
  
  
• Provides an electronic record of documents received from clients—making it easier to identify what is missing and quickly find individual documents to fulfill client requests
  
  
• Reduces the cost of supplies related to copying, such as paper and toner

And that’s just skimming the surface.  When you consider adding a paperless tax workflow solution to automate the tax preparation process, like scan-and-organize or scan-and-populate tax document automation solutions, then you leave the more ordinary benefits and start getting into the really good stuff—like efficiency and productivity gains. 

For a deeper look at how you can fit scanning into your firm’s tax workflow and ease your way into workflow automation, read our free white paper: Automating the Tax Process for Maximum Efficiency - Taking a Phased Approach

Scanning Tax Documents: High Quality Input Yields High Quality Results

If you’re going to go paperless, start by creating high quality PDFs of scanned documents.  

For best results, scan original forms in black and white, at 600 dpi, in duplex.  It’s as simple as that. Whether you’re scanning documents for archival, scanning before preparation, or using tax document automation software to organize and extract data for you, these four requirements are at the core of document quality. 

Here’s why:

• Original Forms - Every time a document is copied, the image quality is degraded. The further removed you get from the original document, the “noisier” the document becomes. Noisy documents are hard to read.
  
  
• Black and White - Though color and grayscale may look more readable to the human eye, scanning your documents in black and white will ultimately provide clearer images.
  
  
• 600 dpi – If you’re using tax document automation software, higher image resolution will improve the accuracy of document organization and data extraction. High quality input generates high quality results. Likewise, low quality input will lead to lower accuracy in forms recognition and extracted data. Because software is “reading” the documents and extracting relevant data, it is crucial that the scanned images you submit for processing are of the highest quality and are as clear as possible. Submitting documents with higher resolution will also provide up to 50% faster turnaround. 
  
  
• Duplex – Duplex is just a fancy word for scanning both sides of the page at once. Scan both sides and you won’t miss any important information on the backs of pages.

Get these four points down and you’re pretty much covered. If you want to take it a step further—particularly if you’re using software to organize and extract data from the scanned documents—here are some more tips to get the highest quality images:

• Give Scanned Documents the “Readability Test”:  If your eyes are straining to read a document, software will likely do the same. Noisy, hard to read documents will make it difficult for the software to read field labels and data contained therein. If software can’t read the data, it can’t extract it and populate it into the tax return.  
  
  
• Look out for Distortion—Scan the Document at its Original Size. For best results, the size of the scanned document should correspond roughly to the size of the original document. If the size of a document is greatly reduced or expanded when scanned, it increases the chances that the scanned image will be distorted. Distortion may also be caused by scanning documents that are folded or crumpled, and by documents that were caught in a paper jam while being scanned.
  
  
• Scan Each Document to Its Own Page. If more than one document is scanned to the same page, only the dominant form, as determined by the software, will be bookmarked. Visibility of the less dominant form(s) will be lost, as only one bookmark will be generated per page. For scan-and-populate users, data will not be extracted from either form.
  
  
• Avoid Submitting Documents with Faint or Faded Text. Not all original tax documents are suitable for processing by tax document automation software. Going back to the “Readability Test”, faint, faded text is hard to read and therefore may not be properly classified. If a document cannot be classified, the data cannot be extracted by scan-and-populate software.
  
  
• Avoid Black Backgrounds, Ink Bleeding, and Smudging. Black backgrounds can be created by leaving the tray cover open during single page flatbed scanning. Black backgrounds, ink bleeding, and smudging are considered “noise” and can slow processing.
  
  
• Avoid Submitting Clipped or Cut Forms. Clipped or cut forms may be missing important data that the software needs to identify and classify the form, and to extract the tax data.
  
  
• Scan Multi-Page Documents Together. Multi-page documents, like brokerage statements and K-1’s, should be submitted in logical order, where possible. Most software will not reassemble a multi-page document that has been scattered throughout an input PDF.

Now that you know what to look for, it will be easy to spot documents that won’t make the cut before being processed by tax document automation software. Download our free tutorial to learn more about best practices for scanning tax documents.

Scanning Tax Documents: Considering the Benefits of Front-End vs. Back-End Scanning

The introduction of workflow automation tools—like tax document automation software—presents some exciting possibilities for streamlining workflow and improving productivity.  Firms that have automated workflow by going “paperless” will tell you that implementation is best handled in phases—the first major transition being the adoption of tax document scanning. 

Most tax professionals agree that scanning tax documents is more productive than the alternative—hours in front of the copy machine, burning through reams of paper. But the real question is not to scan or not to scan—it’s when to scan. There are two basic camps of firms that have already incorporated scanning into their workflows:  firms that scan on the front-end and firms that scan on the back-end.

Scanning on the Front-End

When you scan sets the stage for the level of efficiency gains your firm can realize as a result. Firms that scan tax documents on the front-end position themselves for a completely automated and highly efficient paperless tax preparation process.  Consider this:

1. Scanning tax documents up‐front creates a digital library of docs that can be immediately accessed throughout tax season. With source docs stored electronically, support staff can fulfill client requests in seconds during the busy season—locating the electronic file and emailing it to the client in a few clicks of a mouse—without interrupting billable work.

2. By scanning documents initially, firms can make use of tax document automation systems to automatically extract and import tax data from scanned tax documents, and create an organized, bookmarked, and labeled PDF of source docs. This step can eliminate manual data entry and paper handling altogether, as documents may be scanned in any order before uploading for bookmarking.

3. Digital files can be stored within the firm’s DMS or network hard drive for final archiving. This helps firms gradually reduce the use of paper and eventually phase out file cabinets.
   

Scanning on the Back-End

Back‐end scanning also provides electronic copies of client files for archiving purposes, which eliminates manual filing at season end and reduces the need for physical storage.  However, with back‐end scanning, efficiency is only realized at the end of the process. 

Scanning on the back-end eliminates the possibility of automating the tax process with automatic data entry and document organization.  Relying on paper files from the start, staff must manually organize source documents and use paper copies to prepare returns and fulfill client document requests during tax season. This is not only time‐consuming for staff, but it also means longer response times on the client end.

Develop a Plan and Stick With It

Whether you decide to start scanning tax documents on the front- or back-end, make sure you develop a plan to get started.  Who is responsible for scanning?  Where will you save the files?  Will the file names follow a specific naming convention?  These are the types of questions you should consider before applying changes to your workflow.  Having a plan will make for a smoother transition and provide a cohesive structure for your staff to follow—no exceptions.

Tax Document Scanning 201: Using Software Provided with Your Scanner

So you’ve gone out and purchased a scanner—now it’s time to figure out how to use it. The purpose of this entry—courtesy of Sarah Smith from Fujitsu—is to make sure that you are getting the most out of your scanner and the software that comes with it.

Guest blogger Sarah Smith writes:

In a perfect world, we would be working with perfect documents all the time.  But, like most users, you probably have old documents and new documents—of all different sizes and all different qualities—and really do not want to go through each and every one in order to make sure they are all facing the right direction.

If this is the case, you are going to want to dust off the image enhancement software that came with your scanner. Because I know Fujitsu scanners best, this entry is going to focus on the software that comes bundled with Fujitsu scanners. But keep these image enhancement features in mind when making purchasing decisions for new scanners, or when using scanners that have already been purchased.

All Fujitsu fi-series scanners (beginning with the fi-6130 and up) come bundled with a few basic pieces of software that will make your life easier when it comes to document imaging. The two most important pieces for scanning tax documents are Kofax VRS and Adobe Acrobat Standard. These software licenses come free in the box with every Fujitsu scanner, which is a HUGE value to you.

First, let’s talk about Kofax VRS. VRS stands for Virtual ReScan. Translation to you: amazing software that does all of the heavy lifting when it comes to scanning documents. VRS works behind the scenes to perfect the image quality of every document you scan.

Here are some of the significant “I can’t live without” features included in Kofax VRS:

• Crop – The software crops images so that no matter what size document you scan, all you see is the document—no borders
• Rotate – Images are automatically rotated to face the correct direction/page orientation
• De-skew – If a document is scanned at an angle, the software will automatically de-skew it
• Blank Page Deletion – If some of the documents are double sided and some are not, the software will automatically remove the blank pages from the finished set of images
• Advanced Clarity – Wrinkled and other imperfect source documents are no match for VRS!  Advanced Clarity will process documents with complicated, textured backgrounds.
• To read more detailed descriptions of the features included with VRS software, visit: http://www.kofax.com/vrs/features.asp

Basically, image enhancing software does all of the prep work so that all you have to do is throw (or place) your documents in the ADF (Auto Document Feeder), and your messy, unorganized paper has been transformed into picture-perfect electronic files. 

Next up, Adobe Acrobat Standard. You probably already know what this is and have Acrobat viewing capabilities (Adobe Acrobat Reader)… but do you have a full version of Adobe Acrobat Standard that allows you to actually create and edit PDF documents? Adobe Acrobat Standard makes working with electronic documents easy by creating an environment where scanned documents can be processed, edited and shared electronically. 

Among other capabilities, Adobe Acrobat Standard allows you to:

• Create and edit PDF documents
• Add tick marks to electronic PDF workpapers
• Add comments and other annotations from multiple users on PDF documents
• Add, edit, and move bookmarks (electronic links) to any page within a PDF file
• Combine PDFs from multiple sources or scans

(Editor’s Note:  Detailed tutorials on working electronically with PDF source documents will be covered in later blog posts.  Stay tuned!)

In summary—some say that they don’t need the functionality provided by image enhancement software, but that is probably because they have never used it! Once you begin using document scanning software with these features, you will never want to scan tax documents without them again.  

Learn more about using scanned client source documents to prepare returns.  Read our free white paper, Five Essential Techniques for Preparing Returns using Scanned Tax Documents.

Key Questions to Consider When Choosing a Tax Document Scanner

Sarah Smith from Fujitsu guest blogs on how to choose a scanner that best suits your office environment:

This article is designed to help you ask yourself the right questions when you are in the market for a new document scanner.  I hope you find it helpful!

Key Questions to Consider When Choosing a Document Scanner:

1. Do I need to scan both sides of a document?  If so, you’re looking for a duplex scanner.  A simplex scanner scans only one side of a page. A duplex scanner scans both sides at once. This distinction can make a significant difference in maximizing the time-saving benefits of the scanner you choose.
   
   
2. Do I need to scan multiple documents at once?  When scanning tax documents, you’d ideally like to be able to throw a stack of documents into the scanner, hit scan, and voila!  You’re done.  In this case, you’re looking for an Auto Document Feeder (or ADF) scanner.  Fujitsu ADF scanners can scan documents ranging from 2”x3” to 12”x18” in length and from 11 to 56.2 lb. in weight (standard printer paper is weighted at 20 lb. per 500 sheets). If you are scanning anything thinner than tissue paper or thicker than an embossed credit card—or if you often like to scan pages out of books or periodicals—then you probably want to consider a scanner that has both ADF and flatbed functionalities.  
   
   
3. What speed should I be looking for? Scanners of today range in speed from 10 pages per minute (that is 20 images when scanning both sides) to 120 pages per minute.  Focus on the speed of the scanner when scanning at 300dpi in black and white.  This is the optimal setting for scanning tax documents, and therefore the setting you will be using most.
   
   
4. Am I scanning documents into a specific software application? Many software applications cannot communicate with scanners unless the scanners are TWAIN or ISIS compatible.  TWAIN and ISIS are standard drivers that basically tell the hardware (your scanner) how to communicate with the software you’re connecting to.  If a scanner does not specify compatibility, do not assume it is TWAIN or ISIS compatible!  More likely than not, you will be left with an incompatible scanner.
   
   
5. How many documents do I intend to scan per day?  Are you scanning less than 2,000 documents per day? If so, then you are looking for what we call a workgroup scanner. These scanners are typically small in size, yet still fast and powerful.  Their small size allows them to fit easily on a desktop, so the primary user doesn’t need to get up from his or her desk to do the scanning.  If you are scanning between 2,000 and 4,000 documents per day, we recommend you consider a departmental scanner. Departmental scanners are still usually small enough to sit on the desktop, but work at a much quicker pace. Because of their speed, they can even be set up in a centralized location for multiple users to access.
   
   
6. How much should I expect to pay for a quality document scanner? Workgroup scanners are typically priced between $800 and $1,200. Departmental scanners range between $1,500 and $2,000.
   

As you can see, there are several factors to consider when deciding which scanner is best for your firm. Rest assured that, though there is a lot to consider, there are people here to help you! If you have any questions around finding a device that is right for you—or any other questions specific to Fujitsu scanners—please contact the Fujitsu Pre-Sales Support Team @ 888.425.8228 or email them @ fujitsu_inside_sales@fcpa.fujitsu.com.

Where do I go from here?

Now that you know what to look for, here are a few options from industry-leader, Fujitsu, for you to keep in mind when shopping around:

Workgroup Scanner:  An ideal workgroup scanner is the Fujitsu fi-6130.  This is an ADF, duplex scanner that can scan up to 30 pages per minute (60 images per minute, both sides) at an image resolution of 300dpi.

Departmental Scanner:  A great departmental scanner is the Fujitsu fi-6140.  This is an ADF, duplex scanner that can scan up to 40 pages per minute (80 images per minute, both sides) at an image resolution of 300dpi.   

Both of these scanners are perfect for tax document scanning, and can be purchased at a special Copanion discount from Fujitsu premier partner, 1st-in-Scanners.

Scanning 101: Basic Settings for Tax Document Scanning

The first step in going paperless, and the heart of all paperless tax workflows, is scanning documents.  The documentation you receive from clients will continue to be paper-based—and all of that paper has to go somewhere before you can start working with it digitally.

But not all scanning is created equal.  The image quality of scanned documents starts at the scanner level.  If your scan settings are not optimal for scanning tax documents, the image quality of the resulting scanned document will be lacking.  Set your scan software to the following basic image specifications to ensure you always scan your documents right the first time.

• Scan to a PDF.  To create a PDF from your scanner, choose File > Create PDF > From Scanner in Adobe® Acrobat®, or any industry-standard PDF writer.  You can also choose whether you’d like to create a new document or add the scanned pages to an existing document.

• Scan at 600dpi.  Make sure your image settings are set to scan the document at a resolution of 600dpi (this is not the same as scanning at a lower resolution and then saving at 600dpi).  This setting is especially important if you’re planning to use a scan-and-organize or scan-and-populate tax document automation solution.  Software that “reads” and extracts data from scanned tax documents may not be able to identify the text on low resolution images.

• Scan in black and white.  Scanning in black and white will create smaller files, so they’ll take up less space on your hard drive or in your document management system (DMS).  And again, if you’re using tax document automation software, this scanner setting will provide clearer images for processing—and they’ll take less time to upload.

• Scan the original documents. Every time a document is copied, the image quality goes down. The further removed you get from the original document, the “noisier” the document becomes—and the harder it is to read.  For best results, scan the original source document, as received by the client.  Avoid using copies of client documentation—especially faxed copies, which are very low quality.

And finally, automatically organize your scanned client source documents.  Though this doesn’t exactly fall under the “Scanning” heading, it will change the way you scan documents.  If you know you’re going to be using a tax document automation solution, to automatically index and organize your client’s source documents, you won’t need to sort the documents before you scan them.

GruntWorx Organize allows you to scan a stack of disorganized client documents and will automatically identify, organize, bookmark, and label each document with the document issuer’s name on each bookmark.  Using GruntWorx Organize will also allow you to completely hand off the organization and scanning to support staff, so your preparers can focus on more value added activities.  Best of all, you can try 5 returns free to evaluate how the product works and how it can fit into your paperless tax workflow.

To learn more about the do's and don'ts of scanning tax documents, download our free tutorial, Best Practices for Scanning Tax Documents