How to Expedite the 1040 Review Process This Tax Season

A common theme in the accounting industry is the shift from compliance work to advisory work. There has been much written about it, hundreds of webinars, and technology that supports that shift. 

It makes sense, and it sounds great on paper. 

Despite the best laid plans, something happens in every firm…every year…that puts that shift on temporary hold. Tax season. That compressed 10ish week time period where work floods into firms like a tsunami and tax professionals work feverishly to meet the looming 4/15 deadline. There is a tremendous amount of compliance work that simply must get done. While automation can help with tax preparation, the 1040 review has largely remained a tedious and manual compliance process.

There is a way.

…to remove hours at the manager and partner level from the 1040 review process.

…to accelerate the development (in the heat of tax season) of your preparers with just in time training.

Which results in…

… Reclaiming valuable billing hours at the manager and partner level to focus on business development, marketing, or higher value services.

…Preparers becoming reviewers for the next tax season.

What most firms are using to review 1040s today

The vast majority of firms use some sort of digital annotation tool to review 1040s, ultimately double-checking each input of the tax software against taxpayer source documents. Is that productive and completely fail safe when you are in hour 10 or 12 of your day and finding the same mistakes over and over again?

Other firms use a sort of “homegrown” checklist to spot check key areas of a return quickly without double checking every input. While this may shorten the overall 1040 review process, it allows room for error.

In either case, there is an easier way, and it involves a mindset shift.

Why use an independent tax verification tool?

If you have an independent tax verification tool that allows for either a preparer or first reviewer to create an expectation of what the return should look like, discrepancies are identified instantly without any need to tick and tie. Most firms have a general tax prep workflow that looks something like this:

Preparer either scans in or keys in data from taxpayer source documents to tax software. When finished, the return is routed to a reviewer. Reviewer manually double checks all inputs with either a digital annotation tool or an internal checklist. When mistakes are discovered, they either fix them or make review notes and route the return back to the preparer. Preparer makes corrections and then sends the return back to the reviewer for final review and sign off. This is simplified, of course, but represents the general flow at a high level.

If this is your firm, chances are that the reviewer is spending a significant amount of time correcting mistakes AND/OR writing review notes to send back to the preparer for correction. After tediously ticking and tying. How much billable time are you spending per return on a review like this? 

Instead, consider this simple idea.

Have the reviewer create a quick separate expectation of the return. When they receive the completed return from the preparer, if they have an independent expectation to compare it to, discrepancies are automatically and instantly identified without having to tick and tie and review every single input. 

It’s also a good practice to identify preparers who have the desire and ability to become reviewers. For these rising stars and valuable team members, we’ve found it to be a productive process to have them create the independent expectation along with the return in the tax software. Again instantly isolating any discrepancies- they are able to learn the tax code much faster, accelerating their development to become a review. Even better- when both the return and the independent expectation get to you as the reviewer, your job was just dramatically shortened. All that’s left is to open up the tax verification tool, skip past all of the data that has already been independently verified, and focus in on anything that may either represent a more advanced judgement call on tax treatment or even a client advisory opportunity.

What does this leave you with as a reviewer? TIME!!!!

Some firms have an additional step in the review process and add a second, final review level- usually a partner. This is an even easier case for change. That partner should not be spending more than 15 – 30 minutes reviewing any 1040. Here’s how. If the independent expectation for the 1040 return is created at the first reviewer level, the final reviewer should merely have to open that tax verification instance, skip past all of the independently verified inputs and address only tax treatment or advisory opportunity questions that require their level of attention- much like the second scenario above.

As a partner whose expensive time is much better spent on higher value advisory and growth opportunities and with clients, you just gained a lot of valuable billable time back during tax season.

TaxExact expedites the 1040 review process by independently verifying the results of your tax software and allowing partners and managers to reclaim valuable billing hours. Want to know more and get access to a free trial? Click here to schedule a quick demo and get a free trial.