Tax Prep Workflow; A Christmas Story


Once upon a time, in an Arizona Desert far from the North Pole, there lived a tax nerd named Liz. She was a giant nerd, one focused heavily on innovation and efficiency. Once a year, she delivers the gift of a tax return to her clients. Her team of brilliant tax elves made it all possible. However, she realized the elves were using the same process they had been using for the last 10 years. It was a profitable process and yielded happy clients, but she did not believe it was the best it could be. So, she started doing some research to make it better and improve the lives of the tax elves.

First we must address the Ghost of Tax Preparation past, a process that originated much like many tax processes do, with a shoebox full of bank statements, barely legible receipts, credit card statements, a few random notices, some discarded candy wrappers, random mail, and a bunch of empty envelopes. First, an admin elf would sort through the box and pull out any relevant documents. The documents would be scanned while the elves drank hot coco and sang merrily to themselves and not curse at the box or the scanner. The tax documents would be stored centrally for a tax elf to access and prepare the annual bookkeeping. This bookkeeping was done in disparate systems. Sometimes the tax elf would choose an outdated desktop program named QuickBooks to organize the documents. Sometimes the tax elf would choose an Excel spreadsheet to organize the data. Other times the tax elf would give up and eat a candy cane instead. After the bookkeeping was finished, the tax return manufacturing process would continue with book to tax workpapers created in Excel. The numbers were then manually added to CCH Prosystem with a little holiday cheer and some magic to produce the beautiful tax return our clients needed. The tax elves would work hard for months to make sure Tax Day was magical for our clients. Sometimes they worked so hard that no amount of hot chocolate could cheer them up. Tax Nerd Liz wanted to help.

In order to accomplish greater efficiency, Liz had to dig deep to find the best tools for the job. The requirements were clear:

  1. Reduce time to produce magical tax returns
  2. Eliminate manual data entry, and
  3. Be able to produce financials quickly during the year for tax check-ins.

Liz decided there were a few process improvements and a few tools that could make the tax preparation process more fun for clients and tax elves alike. The first change was to the document collection process. The admin elves started training the clients on how to send information electronically and organized. Clients now know how to scan and remit their statements directly to the shared drive or have given us read-only access to their bank accounts. The tax elves had a candy cane party when they were able to download .csv files of a years’ worth of bank transactions! For the clients that submit receipts directly, they now have them filtering through hubdoc to code the receipts automagically. And, for the clients that send PDF bank statements, they send them through AutoEntry to pull each line item for the tax elves.

Since the majority of these clients have their bookkeeping handled on an annual basis, the information is flowed through a Xero Ledger file. The tax elves found that the ledger accounts still allow for external integrations and are only $3/month! They were very happy tax elves when they realized the potential for doing the general ledger tie-outs in Xero. They are able to use the cash coding tool to efficiently code all of the transactions, generally within an hour.

For clients on the tax basis of accounting, Xero released a great tool for tax line mapping. The tax elves had a small dance party when they realized the potential for this tool. Now, straight from the general ledger, they can match the tax lines and print tax reports to tie-out line by line to the tax return. This eliminates the extra Excel book to tax tie-out the tax elves slaved over. To access the new feature, the tax elves click on the “Accounting” menu and select “Chart of Accounts,” which brings them to this screen:

From here, click “Map Accounts to Tax Lines” and you will be able to see where the magic happens, as well as the tax forms available.

For clients that are not on the tax basis of accounting, they still had to solve for the book to tax reconciliation that the tax elves prepared in Excel. Tax Nerd Liz found a tool called regroupTax that allows you to import the general ledger directly from Xero (in less than two seconds), book tax journal entries, pdf book to tax reports so pretty the elves framed them, and push out an import file into CCH products. The entire book to tax reconciliation process now takes 15 minutes for the tax elves. regroupTax produced a demo video here, and if you move to minute 8, you can witness the way to link directly to the Xero files. Exporting from regroupTax and importing the tax numbers directly to the tax prep software saves them an hour of work on each return.

End to end, the new tax preparation process eliminated 50% of the manual efforts and gave our tax elves back some daylight through their busy season! The tax elves are now so efficient at creating financials from questionable documentation that they are doing much more planning and advisory throughout the year, but that is a tale for a different day. All in all, the tax elves were so thankful and excited about this new process that they even poured a sip of brandy into their hot chocolate to celebrate!

Happy Christmas fellow tax nerds!

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Liz Mason is a serial entrepreneur, a giant nerd, and an involved accounting vanguard. She is the Founder of High Rock Accounting, Rebel Rock Accounting, TheDepartment.Tax, and a few other related brands. Liz speaks on a national stage, guests stars on podcasts, and writes frequently. To further her passion for the advancement of the accounting profession, Liz currently serves as a Xero National Ambassador and as the Content Strategist for Tax Practice News. Liz started her career in tax at Grant Thornton (at 20) and automated a portion of her job landing her in the national tax practice. She spent a decade in large public accounting firms working on highly technical tax consulting before branching off on her own. Liz utilizes her creativity and passion at her company to uproot traditional practices and replace them with innovative concepts. She finds joy in efficient technology and her core belief is that everyone and everything can continuously improve (she says "be better" too often). When Liz isn't planning world domination in accounting, she is a die-hard skier, down for any adventure, plays the ukulele, reads everything, and has a good sense of humor. If you're looking for her, you can find her traveling the world and enjoying new food and cultures with her young son. Follow Liz and High Rock Accounting on Twitter at @LizzyNorMa and @HighRockCPAs.