Your tax practice faces a number of challenges, including tax law changes and new client tax scenarios. The right tax preparation software can be your competitive advantage in addressing these challenges, helping you service clients, file accurate tax returns, and work productively.
Evaluating the best tax preparation software depends on the type of practice you manage, your firm’s workflows, and areas of particular tax expertise. To make this evaluation process easier, focus on these essential considerations.
Consider the number of tax returns you process, the size of your staff, and whether you focus on particular industries in your practice. If your company focuses on partnership returns, for example, the tax software must be able to generate dozens (or hundreds) of accurate K-1s for partners.
Find professional tax preparation software that provides all necessary IRS forms. If you’re expanding your tax practice into a new area, you need access to the required tax forms.
Tax managers need tools to manage workflows, and business owners need data to measure staff productivity and to assess profitability.
Managers need to track hours spent on each return and the missing documents that must be received before each return can be filed. This becomes more important as you approach filing deadlines.
Tax laws are updated constantly, and tax software providers must provide timely updates to reflect the latest requirements. Ideally, tax software should be updated automatically through the cloud.
If, for example, Form 1040 must be updated for tax law legislation passed in December, the software must be updated before you can prepare returns in the spring.
Federal Trade Commission regulations require professional tax preparers to create and enact security plans to protect client data.
The IRS points out that criminals attempt to steal your clients’ data so they can file fraudulent tax returns that better impersonate their victims and are harder to detect. They are trying to gain access to:
Tax software must provide encrypted data storage and a secure system for file transfers.
Software access issues, slow processing times, or confusion about navigating screens will slow production. You need responsive customer support, particularly during tax season.
Work with a software company that offers extended support hours during tax season. Tax practices can’t afford to lose time dealing with software issues as tax deadlines approach.
Avoid tax software that has a steep learning curve and provides a poor user experience. Software vendors should provide comprehensive online learning tools, including webinars.
Your staff needs time to focus on tax law changes that impact client returns. Use software that does not require a big time investment to learn.
The ability to navigate quickly through the software is critical for productivity. Assume, for example, that a team member is entering cost basis and prices from an investment statement into software.
Tax software should make it easy to find the correct input fields to produce Schedule D. When software provides a smooth experience, your entire staff can work more efficiently.
Most practices will need multi-user access with role-based permissions, which allows you to control what information each team member can access based on their responsibilities.
Tax preparers also need integrations with other types of software, including e-filing functionality that tracks the status of returns and alerts if a return is rejected.
Your firm needs the ability to customize software to meet your needs.
Let’s assume that a senior tax preparer must review the work of three less experienced CPAs. You need a workflow management process that assigns completed returns to the senior accountant for review.
As tax season ramps up, tracking the progress of each return becomes more important.
You need the ability to convert data from multiple sources into the tax software. Tax preparers often need integrations with clients’ accounting software and data from bank statements and credit card statements.
Automated data conversion can save huge amounts of time and reduce the risk of manual errors. If you can upload 1099s and other documents into the software, you eliminate manual input.
Cloud users can access tax software from anywhere at any time, which is a factor if your staff works from home. Software should provide the same level of security and cloud backup, regardless of where a team member is working.
Using the cloud makes collaboration easier, and you don’t have to worry about different computers using different versions of the software. If you use cloud-based software, any changes to a return are updated quickly.
Desktop-based software, by contrast, requires manual updates instead of automated cloud updates. If your team uses desktop software and a computer crashes, you risk losing data that has not been backed up.
Using less expensive software that doesn’t meet your needs can slow productivity and lead to poor client service. If you choose an inexpensive solution that requires you to use Excel or other tools, you can’t work productively.
On the other hand, high-priced software may provide features that you don’t need. As you review software vendors, make sure you understand how they charge for advanced functionality.
Software companies may charge per return or use an annual licensing fee. Select software that provides strong customer service at a reasonable cost.
Sigma Tax Pro provides this useful tax software comparison chart. Use it to assess your needs and to choose tax software that best fits your business.
Automated error detection identifies errors, including missing input, calculation mistakes, and data inconsistencies. With Sigma Tax Pro software, the tax preparer is alerted and errors are corrected before the return is filed.
A single return can involve dozens of calculations, and even the most experienced tax accountant may miss something during review. Automated error detection adds an extra layer of assurance.
Tax software can use OCR scanning to upload documents, reducing the need to manage paper copies. Documents can be accessed easily by your entire team, and your staff can avoid flipping through paper files to complete a return.
Productivity during busy season depends, in part, on how quickly clients provide supporting documents. As tax season progresses, you may have dozens of returns that only need a few remaining documents before the return can be filed.
A growing number of software companies provide client portals. Clients can log in and upload documents automatically, and receive alerts when data is missing.
Client portals are tied into the software’s data management system. When a client uploads 1099s, those documents are automatically filed in the cloud.
A bank product is a service that allows tax professionals the option of having their preparation fees deducted from the client’s refund, instead of charging their fees upfront. With bank products, taxpayers who can’t afford to pay upfront can still receive their tax refund early and pay the tax preparer from their refund.
Sigma Tax Pro’s bank product feature also offers taxpayers the option to receive cash advances.
To add more clients, expand into new services, and scale your business, you need the best tax software for tax preparers. The right software provider can help you save time and increase profitability.
Sigma Tax Pro provides industry-leading software solutions and tax preparation support at the lowest prices available.
Reach out to Sigma Tax Pro today to learn more.
