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Welcome to Tax Season – Tax Preparation Process

February 21, 2017

Here is how a tax return gets done in an accounting firm. I know this is upmost on your minds so decided to give you a look-see. Preparing returns is a detailed process involving multiple people in the firm – even the simplest returns go through these procedures.

  1. Every accountant in the firm takes a full day tax update course in December
  2. The firm has an in house “getting ready for tax season” meeting, usually about two hours, to update staff on software changes, quality control procedural updates, scheduling, client contact and process changes and issues to be aware of
  3. The accounting firm sends client an organizer in January after a partner of manager reviews it for applicability
  4. When client sends in their data, it is reviewed by a partner for completeness and any notes or comments that need to be taken care of before the return is processed or answered independent of the tax return processing and those questions are then responded to
  5. The partner will indicate the level of complexity for the tax return scheduler
  6. The tax data is given to an administrative person who scans the data in our secure smart scanner software
  7. The smart scanner software will “read” the information on the client’s tax statements and populate the tax preparation software
  8. The smart scanner also supplies a fully indexed file of all of the client’s tax data
  9. The scheduler will assign the return to a preparer using the information previously provided by a partner
  10. The accountant assigned to prepare the return will be notified by the work flow software that the return is ready to be worked on and he or she will verify that the input was properly done by the smart scanner software
  11. After the verification, information that could not be handled by the smart scanner will be entered into the tax preparation software
  12. The preparer will then review the client’s “filing cabinet” for information entered during the year independent of the tax preparation process that would affect the preparation of the return or for information the preparer and reviewer would need to know of be aware of when working on that client’s return
  13. If there is missing information of items that need clarification, the preparer will discuss with a partner and if necessary will call the client for the missing data. If the client doesn’t respond promptly (usually within a few days) there will be follow up calls. At this point the return is put on hold awaiting the missing information. When it arrives, the return will then be completed. Comment: Clients occasionally get upset with multiple calls but the reason for the excessive calls is their lack of responsiveness to our earlier requests to get their return completed in a timely manner
  14. When all the entries are completed a diagnostic report will be generated indicating entries that need correcting or that require a further look
  15. After the diagnostics are cleared, the preparer will then review the return for reasonableness, inconsistencies or missing information, red flags and changes made accordingly
  16. The preparer will also compare the final return to the client’s previous year’s return and also to the projection if one was done
  17. If the return is correct but there are large differences from the prior year, the projections or what appears to be a surprise result, a reconciliation will be prepared indicating the reasons for the exceptions for the quality control department to review
  18. The return is then assigned to a member of the quality control group
  19. By the way, all assignments are done with work flow software and through the secure paperless cloud based system. The only paper used in the tax preparation process is the documents the clients that do not use the firm’s portal send in or provide at a meeting for that purpose. The entire work product is paperless until it is time to provide something in paper to a client that requests a paper document. There will be some returns that will be assigned beforehand to a specific reviewer. This will be indicated in the work flow software
  20. Someone in the quality control group will review the return for accuracy and completeness and for tax planning, compliance, tax savings issues and red flags that might cause an audit. Some of these issues could affect the return being prepared, a prior year’s return necessitating an amended return or a carry back adjustment, or the planning for the current or a future year
  21. If corrections are necessary, the return is sent back to the preparer to make the changes
  22. After the corrections are made it will be returned to that person in the QC group
  23. If there appears to be a “surprise” result, the QC person will discuss this with the partner in charge of that client and to determine who will call the client. With good news it could be the reviewer or preparer. For bad news it likely will be the partner
  24. After all reviews the return is sent to the admin department who will assemble the return for filing
  25. A partner will then review the return, sign it and approve it for filing
  26. An admin person will send a copy (either via the secure portal or a hard copy by mail) to the client to review before it is finalized for e-filing. Included with the return will be the tax payment and estimated tax forms that will be used once client accepts the return. Client will be requested to return an IRS designated form to us signifying their consent for e-filing
  27. When the consent is received by us, it will be e-filed
  28. If return is to be filed by mail, a final return will be sent to the client with full instructions and mailing envelopes to the tax agencies. Included will be all estimated tax vouchers for the year
  29. All backup will be filed by the admin person and will be maintained on the secure cloud based filing cabinet
  30. Bills will be sent out either with the return or the beginning of the next month after our time records are reviewed
  31. When payment is received, staff bonuses or overtime will be paid and distributions will be made to the partners
  32. Then we can all take a vacation
  33. After the April 15 tax season, usually in the late Spring and Summer we meet with clients to follow up with additional planning where a need was indicated when we prepared their returns
  34. However, tax season doesn’t end on April 15 (April 18th this year). If is continued through the extension filing date of October 15
  35. Then we start getting ready for next tax season
  36. Tax preparation is a twelve month process, but we love every minute of it!

I hope this gives you some insight on the care and attention that accountants give to every client’s tax returns. It is an involved process with many people but it works and we usually get great results for our clients.

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