Tax Preparation Services Automate Functions to Deal with Challenges

Tax preparers can avoid many of the challenges of manual processing by integrating automated solutions to categorize, file, and verify their processes.

FREMONT, CA: Automation and artificial intelligence can make itemizing, monitoring, and reporting easier for accountants. Tax preparation is still far from reaching the inflection point for significant adoption, but firms worldwide are taking steps to test and build their automated tools.

A successful tax preparation process needs to have good one-on-one communication as well as a thorough human review. The use of digital tools will only partially replace the role of accountants, and the process can be smoother if machine tabulation is balanced with human review.

Automating certain tax preparation services can help in the following areas.

Categorization: The categorization of transactions remains very manual, which consumes considerable time. Accounting lines-by-lines can result in human error with accountants conduct line-by-line reviews. Categorizing errors results in clients needing to receive the maximum tax credits and write-offs they should receive; if they need to be corrected, errors could trigger audits. AI can categorize expenses effectively and correctly each time to eliminate human error in categorization. The technology could even apply categorization rules learned from one company's tax process to a network of users in the future by incorporating artificial intelligence (AI) and machine learning (ML) systems.

Filing: Tax systems are complicated due to the principles of fairness, efficiency, and enforceability, which add layers, steps, and required forms as they become more complex. The problem is that not all businesses keep good records of their forms, and not all bookkeepers can manage their roles in real time. It is possible to automate tasks that must be done at a rate that humans cannot replicate on their own using automation. Professionals spend extra time backtracking through expenses to track which vendors must receive forms. Accounting departments fail to keep track of compliance because they cannot keep up with the changes. It would be helpful for tax preparers if accounting processes were automated to keep pace with filing and regulatory details.

Verification: An automated accounting system could provide accountants with an immediate view of the financial picture, resulting in fewer questions being asked. CPAs often need to ask clients for a more detailed view of expenses on forms and within spreadsheets to ensure tax forms are categorized, calculated, and completed correctly. Taking the time to dig into the details of these big-picture numbers can affect a client's profitability. Intuitive, live tax software could simplify this process if it offered accountants easier ways to trace the breadcrumb trail and verify large lump expenses by automating the process.