How to plan a digital 1040 tax transformation?

It’s 2020, and one thing is clear: tax preparation technology has moved beyond paperless. Today, it’s all about digital transformation. At every tax conference, there’s an inspirational speaker with a killer PowerPoint who drives home the importance of change and adaptability. We all know slide one: Change with the times or fall behind the curve. This “adapt or perish” message generates a real sense of alacrity, but what often gets overlooked in the hype is the most crucial element of change: planning.

Technological upgrades to your 1040 tax preparation process will generate the promised ROI, but only with a careful and deliberate planning phase. Diving in headfirst without preparation leads to the kinds of outcomes that make people fear change in the first place. The good news is, a little strategic planning is all you need to reap the benefits of the latest 1040 tax automation technology—and sidestep those preventable errors.

In this blog post, we’ve provided a simple roadmap to help your firm complete the planning phase of a digital 1040 tax transformation. The goal of the planning phase is to prepare staff and clients well ahead of the official rollout and to ensure early buy-in from all your key stakeholders. We can break this phase into two distinct steps:

Step 1: Analyze your current 1040 tax return preparation process.
Step 2: Create an implementation strategy.

In other words: analyze, then strategize.

Step 1: Analyze

  • Gather & Deliver: The Client Experience
  • Prepare: Opportunities for Automation
  • Review: Your Hidden Profitability Boost
  • Analysis Conclusion

Step 2: Strategize

  • Further Resources

Step 1: Analyze your current 1040 tax return preparation process.

In the analysis step, your firm identifies pain points and evaluates which changes to adopt. Do you only need small, targeted changes? Do you need a complete system overhaul?

The best way to approach these questions is to compare your current process with a fully digitized one. To streamline your analysis, we’ve created an outline based on the four phases of the SurePrep Tax Process: gather, prepare, review, and deliver. In each phase, we’ll describe what the latest technology can offer. You may find that some parts of your workflow are already optimized, while others could benefit dramatically from new technology.

Before you begin, it’s best practice to generate a visual flowchart. Write down how your firm currently tackles these four phases of 1040 tax return preparation. This will make direct comparison much easier. Need a template? Click here to download ours.

As you follow the outline, we recommend you keep this guiding question in mind: “Where are the biggest bottlenecks in our current process?”

By identifying these bottlenecks, your firm can address the areas that have the greatest potential productivity gains. Clearing those blocks first will free up resources and clear the way for more targeted changes in the future. Alternatively, your firm may decide to address all problem areas at once. The advantage of the latter approach is that training and implementation demands are consolidated into a single project.

Another key thing to keep in mind: Internal improvements won’t automatically result in a better client experience. New tax technology may increase efficiency within the office, but it will be invisible to clients if they aren’t receiving tangible benefits. To be truly proactive, your firm will need to plan your digital 1040 tax transformation with the needs of both tax professionals and clients in mind.

Gather & Deliver: The Client Experience

In the Gather phase, firms collect tax documents, information, and signatures from their clients. In the Deliver phase, the tax return is delivered to the client for final sign-off, and clients are invoiced for services rendered. We combined the first and last phases here because they’re both client-facing.

TaxCaddy is SurePrep’s answer to transforming the client experience as part of your 1040 digital tax transformation process. TaxCaddy is a highly secure client collaboration platform that can be accessed as a convenient iPad, iPhone, and Android app or in a browser.

  • Your firm can…
    • Automatically generate document request lists that are tailored for each client using proforma data from your tax software.
    • Create a custom questionnaire that automatically saves a client’s progress.
    • Offer a mobile option for iPad, iPhone, and Android.
    • Securely deliver the clients’ tax returns in PDF format for final approval and storage. (TaxCaddy can even be integrated with SafeSend Returns.)
    • Invoice your clients and accept payment.
  • With TaxCaddy, your clients can…
    • Photoscan clear, legible documents using their smartphone.
    • Automatically retrieve documents from over 300 financial institutions, like banks, brokerages, and payroll service providers.
    • Upload documents directly to TaxCaddy.
    • E-Sign documents, such as engagement letters and e-file authorization.
    • Securely message their CPA.

To see the software in action, we recommend watching this 23-minute TaxCaddy demo.

Prepare: Opportunities for Automation

In the Prepare phase, firms consolidate workpapers into binders and prepare the tax return.

Advanced scan and populate software is the most powerful tool a firm can employ to maximize resources during this phase. 1040SCAN is a unique OCR solution with four distinct versions that allows firms to combine software and services according to their needs. In other words, you only pay for what you need. SurePrep is the only vendor in the industry that provides an optional verification service.

  • 1040SCAN…
    • Eliminates data entry by using Optical Character Recognition (OCR) technology to extract data from documents like W-2s, 1099s, Grantor Letters, State K-1s and many more.
    • Auto-verifies native PDFs with 100% accuracy; no need for human verification. (SurePrep patented.)
    • Bookmarks and organizes source documents into a standardized workpaper index that follows the flow of the tax return.
    • Recognizes 4x–7x as many documents as the competition.
    • Exports directly to your tax software. Our solutions integrate with CCH Axcess Tax, CCH ProSystem fx Tax, GoSystem Tax RS, Lacerte and UltraTax.
  • With optional service add-ons, our trained staff can:
    • Verify your OCR data prior to export.
    • Index and organize non-standard documents.

1040SCAN integrates directly with SPbinder, which is our bespoke tax workpaper system. SPbinder enables efficient collaboration between all team members who touch a return, from preparers to reviewers.

In SPbinder, workpapers are automatically organized into a standardized workpaper index that follows the flow of the tax return and includes all common workpaper filetypes, like PDF, Excel, Word, and Email.

  • SPbinder allows preparers to…
    • Mark workpapers with tick-marks, annotations, and calculator tapes, regardless of the file type.
    • Create hyperlinked cross-references between workpapers of any file type.
    • Automatically generate leadsheets.
    • Include open item notes and notes for the reviewer.

You can learn more about the four different versions of 1040SCAN by visiting our 1040SCAN information page.

Review: Your Hidden Profitability Boost

In the Review phase, completed returns are reviewed for accuracy. In smaller, boutique firms, preparation and review are sometimes performed by the same person. In all other firms, returns generally travel “up the ladder” from Tax Manager to Tax Partner for review, which means that review time represents the biggest labor cost in the entire tax preparation process.

Reducing review time by increasing the efficiency of the review process is a major profitability booster. (Just how much could your margin grow? Check out our free profitability calculator to find out.)

SPbinder streamlines the review process with the following features:

  • Tracked changes.
    • Change tracking logs what changes are made, when they are made, and by which users.
  • Up to four levels of sign-off.
    • Users can specify which review levels must sign off on tax workpapers. New changes automatically pass back down the sign-off ladder.
  • Change alerts.
    • Reviewers can pick up exactly where they left off: SPbinder lets you know what’s new and what you’ve already completed.
  • Next-generation leadsheets.
    • Top-down reviews can now be performed quicker than ever before with hyperlinked leadsheets that integrate fully with your firm’s tax software to automatically identify variances.

This 14 minute SPbinder demo video should help you get a feel for the software.

Analysis Conclusion

As you compare your current process to a fully automated and streamlined workflow, where do you see the biggest gaps? Where is your process most “behind the times”? Did you identify those stubborn bottlenecks?

In addition to identifying the areas of friction in your current process, it’s worth researching how other CPA firms are addressing the same problems. Industry leaders like BDO have gone fully digital, but today’s technology allows firms of all sizes to transform their tax departments and dramatically improve the client experience. What’s most important is to clearly identify your firm’s workflow challenges, and the specific products that can address your needs.

Step 2: Create an implementation strategy.

Once you fully understand your current workflow and the specific solutions you would like to adopt, it’s time to start mapping out your implementation strategy for your digital 1040 tax transformation. This is the heart and soul of a successful change management process. Because well-planned implementation is so critical, SurePrep partnered with the Center for Project Management (CPM)—a proven thought leader in change and project management—to develop an effective model. The complete, 24-page guidebook for this model is available free of charge.


WHITEPAPER: Managing The Change To Automated Tax Workpapers

This white paper outlines a five-phase change management methodology and implementation tool kit by which your firm can plan, implement, and sustain the transition to a paperless tax workflow.

Download Whitepaper


The first thing you’ll notice as you skim the guide is that it is incredibly comprehensive. Analysis is a fairly straightforward process, but implementation strategy is the deep end of the pool.

This is why our SurePrep Client Success Team is fully trained in this methodology, and a custom implementation plan is included in every solution we offer. If you choose to adopt SurePrep’s technologies, our team will work lockstep with yours throughout the change process.

What does implementation of a 1040 digital tax transformation look like with SurePrep? As a first step, we’ll arrange a meeting to gain an understanding of your firm’s current methods and create a detailed implementation diagram. (If you completed the flowchart analysis of your current process, bring it!) A comprehensive transition timeline will be created. “Champions” will be assigned to each department as points of contact who will oversee the integration of new technologies into your process. Our training program will prepare your tax team with a combination of informational videos and hands-on exercises, with separate tutorials for each role in your firm that focus solely on the products you plan to utilize. A designated SurePrep Client Success Manager will routinely check in with you and monitor your progress. We also provide your firm with unlimited support via email, phone, chat, and GoToMeeting. The average wait time to get us on the line is three minutes.

Final Words

Many firms continue to use tried and true tax return preparation techniques that are decades old, which can make the prospect of change seem overwhelming. Nevertheless, staying up-to-date with technology is a necessity in today’s world. Client expectations are evolving. (“Why can’t I just do this on my phone?”) Tax professionals no longer want manual data entry to be part of their job description, and top talent is migrating to firms that have automated those processes. Firms that went paperless without planning and implementing a fully streamlined, digital 1040 tax process continue to face grueling workload compression. The technologies exist to solve for these challenges, and they’re quickly becoming the industry standard. At SurePrep, we’ve been supplying tax professionals with innovative technology solutions since 2002. We are the leaders in 1040 tax automation, and experts at helping firms leverage our products to reach their full potential. If you’re ready to consult with one of our team members about your firm’s tax technology transformation, click here to fill out our contact form.