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1040 Workpaper Software Makes Personal Tax Easier

Column: From the Trenches

From the Sept. 2008 Issue

If you have more than a few 1040s to prepare in your firm, the new generation
of 1040 workpaper tools that can scan, organize and, in a few instances, populate
your tax software with numbers is worth reviewing. The problem is a difficult
one to solve, but most of the major publishers and a number of startup companies
have tackled the problem. You should, too.

This product genre has a number of offerings that are quite good, and many
are covered elsewhere in this month’s issue (see
Three of my favorites are SurePrep’s 1040Scan, CCH’s ProSystem fx
Scan and Copanion’s GruntWorx. Other notable products include ATX/TaxWise
Scan&Fill and GoFileRoom TaxSort. I have a pretty good list of tax products
and the corresponding workpaper technology at
Finding and organizing client tax data before preparation can be a time-consuming
and tedious task. Surveys completed by Copanion showed that finding, organizing
and entering client tax data averages 40 percent of the total time required
to prepare a tax return.

Here are the key things you need to know when selecting 1040 workpaper software
for your firm or your individual practice:
Many 1040 workpaper products interface into popular tax products. If you are
involved with CCH’s ProSystem fx Tax; Thomson Reuters’ GoSystem
RS or UltraTax CS; or Intuit’s Lacerte or ProSeries, options are available
for you to buy, integrate and solve the problem completely, including the entry
of data.

Using a 1040 workpaper product can change your processes, and you should plan
accordingly. Key decisions include the following:

a) Who does the scanning — staff or practitioner?

b) 1040 Workpaper products assume scanning the client documentation
on the front side. Has your firm been “post” scanning after all
organization, tick marks and review is complete? How is this process going
to change? How much sorting of documents will you let the software do?
c) How will you make annotations? Does the firm need to license
additional tools like Tic, Tie & Calculate from Acct1st? Do you need more
training on Adobe Acrobat? Does the supplying vendor have any tools to assist
with the process?
d) How competent are partners, seniors and managers at using
technology? Can they effectively run the electronic systems? Are they willing
to be trained?
e) Will review be on paper or online? If review is online,
does the firm’s need increase from one to two or three monitors?
f) How do you control the workflow of tax returns? Will you
need a replacement for your control sheet? Will you need workflow software
like XCM or GoFileRoom FirmFlow?
g) How will you ensure data accuracy on products that can
do optical character recognition (OCR)? Who will work with the processed returns
to map the data into your tax software? How is this training going to take
h) Do you have properly installed production-quality scanners
like the Fujitsu fi-6140 or fi-6240? Do you have the resolution set to the
firm or manufacturer’s standard, most likely 300 or 600 DPI (dots per
inch)? Do you have the image cleanup software Kofax VRS installed and working
properly? Are all of the other scanners and multi-function copiers also set
to the standard and the images passed through Kofax VRS, as well? Have you
instructed practitioners and staff to only use the other devices when the
production scanners are not available?
i) Have you decided on a standard naming convention for the
files? Do all team members know how to insert and process those late-arriving

What are the top reasons for using 1040 workpaper software? The following benefits
can be realized with an electronic workpaper product:

Electronic workpaper products convert paper documents to electronic source
documents that provide a much more efficient alternative to Adobe Acrobat for
organizing, bookmarking, referencing and reviewing client source documents.
These products provide consistent, standardized organization of source documents
to do the following:

  • Automatically create better documentation from client paperwork with less
    manual intervention.
  • Optionally deliver to clients, driving up perceived value.
  • Help standardize tax workflows in the firm.
  • Make it easier to find information to address client requests for financial
    statements and potential IRS inquiries when client data is in long-term storage.
  • Assure that every set of workpapers a preparer or reviewer opens looks
    the same and has the same information in the same place.
  • Reduce write-offs resulting from staff performing tasks below their level
    of expertise.

Electronic workpaper products also improve the efficiency of a paperless tax
preparation process by making it easier to do the following:

  • Bookmark, organize, reference, and annotate source documents.
  • Review source documents and workpapers.
  • Track the status of tax returns through an electronic workflow.
  • Share and distribute workload with team members in other locations.
  • Access workpapers from any location.

Utilizing an electronic workpaper product also reduces the strain on staff
(i.e., overtime) caused by tremendous workload compression during tax season.
This takes the “edge off” for staff during tax season by doing the

  • Makes it easier for support staff with limited tax experience to find and
    enter tax data. This frees up more advanced tax professionals to focus on
    higher value activities.
  • Reduces the need to hire a support person/intern to organize paper copies
    of source documents before preparation. 1040 workpaper software is a cost-effective
  • Improves realization. Repetitive tasks are shifted away from highly trained,
    highly paid staff.
  • Improves client service. Information is instantly available when a client
    requests it.

Electronic workpaper products produce time savings, which also leads to the

  • Improves client service by allowing returns to be completed more quickly.
  • Provides an electronic tax workpaper application that makes it easy and
    efficient to prepare tax workpapers in a paperless environment.
  • Saves time finding, organizing, entering and reviewing client tax data.
    1040 workpaper software provides the capabilities to save up to an hour per
    return and typically eliminates 20 to 40 minutes per tax return.
  • Leverages technology and administrative staff to perform tasks previously
    performed by highly paid professional staff.

As I commented in last month’s column about sales tax products (see,
I normally try to stay away from diving too deeply into product descriptions
in my columns. However, I thought it would be worthwhile to give you the top
considerations for the products mentioned earlier in this column.

SurePrep (1040Scan)
Has a very high OCR recognition rate. SurePrep is currently the only vendor
to offer an OCR solution that not only organizes source documents, but reads
the document data from a wide variety of source documents, brokerage statements
and organizer pages and exports that data to GoSystem RS, ProSystem fx Tax and
Lacerte. Note that both Copanion (GruntWorx) and CCH (ProSystem fx
Scan) have announced competing products for the upcoming tax season.

• Boosts productivity for firms who are not interested in outsourcing
(either onshore or offshore).
• Is the only 1040 workpaper vendor to offer an onshore tax outsourcing
solution. For firms who want to outsource but don’t want to do so offshore,
SurePrep is your answer.
• Offers an Outsource “Lite” solution (both onshore and
offshore). The “Lite” solution is for returns that have a large
number of standard documents and is 40 percent of the cost of the full offering.
• Increases accuracy on obtaining certain types of information, such
as cost basis on brokerage statements.
• Has large scale computing power that provides faster turnaround time
on 1040s.
• Uses almost 500 business rules to process documentation logically
and accurately.
• Creates a fully bookmarked file that is mapped to the tax return,
and future years provide even easier processing.

CCH (ProSystem fx Scan)
• Process is run completely in-house.
• Tax organizers can be broken apart by section or maintained as a whole
document. Is the least expensive approach for a high volume of returns.
• Has a utility called PDF Flyer available with the product to make
annotations of 1040 Workpaper PDFs easier.
• Has transportability. Provides the ability to efficiently work remotely
or distribute workload in multiple-office firms.
• Provides instantaneous accessibility. No more putting clients on hold
or calling them back while retrieving a paper file. No more time spent searching
for lost files.
• Multiple staff members can view the file simultaneously. A staff member
can be working with a file at the same time a partner is discussing questions
with the client.
• Was rewritten with an improved forms engine to improve recognition.
Reduces inconsistency between work products.

Copanion (GruntWorx)
• Identifies, organizes and bookmarks scanned tax documents to save
time finding, organizing, entering and reviewing client tax data. Tax professionals
can prepare more returns in less time using GruntWorx.
• Simple and quick processing. Most jobs are completed within one to
two hours.
• Makes it easy and affordable for firms of any size to gain the benefits
of 1040 workpaper software. GruntWorx automatically scans, identifies, organizes
and bookmarks client tax documents for as little as $1 per return. GruntWorx
is the most affordable for smaller firms and tax operations.
• Is web-based, making it easy to deploy. There’s no software
to install, and the application only requires a web browser for use. It features
a simple, intuitive user interface so anyone can become productive quickly.
• Many tax firms lack the resources and time to implement a paperless
process. GruntWorx makes it easy and affordable to take the initial steps
to achieve the benefits of a paperless process with a tax document automation
• Uses biometric pattern recognition and machine learning to improve
classification ability. Delivers greater than 97 percent accuracy in identifying
tax documents. Uses pattern recognition to improve classification ability.
• Outsourced with very redundant and secure communications with lots
of scalability and the same class of encryption used in banking. At the time
of this writing, GruntWorx is the only tax document automation solution to
support the new VeriSign Extended Validation SSL standard for encrypting data
over the Internet.

As you already know, one of my key mantras for 2008 is to simplify. 1040 workpaper
organization products continue to improve each year, and they do the work with
automation and minimal human labor. If you have simple W-2 1040s as the primary
part of your practice, these products will be of minimal help. However, if you
have more complex tax return clients, you will find that the organization and
bookmarking (scanning & organizing) will be worth it alone.

However, as the products advance and can enter more data into more systems
(scanning & populating), you will be amazed that technology can work this
well. Most of the competitors have a trial version available. Select a simple
1040, two complex 1040s and seven medium difficulty 1040s to run through the
process. Look at the results, and see what 1040 workpaper software can do for