The future of tax filing

The way that taxpayers have been preparing and filing their tax returns with the government has evolved over the years. It started with the manual filing of IRS forms by tax advisors, continued with the development of professional tax software that performs most of the calculations for tax preparers (allowing them to focus on tax planning and advice), and ends with the latest trend of e-filing, which allows taxpayers to prepare their own tax returns without using a tax professional and submit their tax returns directly to the authorities online.

So where do we go from here? E-file is taking 100% of the industry? Is the profession of tax preparer doomed? Some believe the future of tax filing is a combination of online tax software with a “real life event approach” and direct access to a live tax professional for on-demand advice.

Back in the old days…

Before e-file and before tax software, it was the tax professional who collected the relevant data from the taxpayer (who often brought a shoebox full of bills, receipts and tax information) and then spent hours (if not days ) to manually fill out all tax forms required by the IRS and calculate each and every line on each and every form. This time-consuming task, done by the light of as many candles as you can imagine, left little time for tax advice or tax planning, resulted in more errors, and resulted in a longer processing time for a refund.

Computers, superheroes of the tax industry…

When computers arrived on the scene, the tax industry slowly began to change. Quickly embracing newcomers, tax professionals were able to prepare a return faster and with fewer errors, primarily due to the use of basic spreadsheets that made tedious calculations much easier. However, it was still a manual process to fill out the actual tax forms and mail them to “Big Brother”.

Professional tax software: the real change maker…

It wasn’t until professional tax software became available that the industry saw some really big changes. Those new creatures had a library of tax software, allowing users to enter, change, delete, and add tax data, and then print a complete return, all done on the computer. No more manuals. wow. Suddenly, tax preparers didn’t have to do any manual filing of forms, any manual calculations; everything was done by the software.

The preparer took care of collecting the data, entering it into the software and after error testing, just click to print and “hallelujah”, everything is ready to be archived. Still, the return shipping was done the old fashioned way, US Post Office.

This new development allowed the tax advisor to focus on tax planning, maximize taxpayer reimbursement, and see the big picture, now that all the manual work has been done by the software.

Consumer Tax Software: Can They Really Do It Themselves?

After the idea of ​​professional tax software proved successful, some computer geeks decided to take it to the next level and allow almost any John Doe to act as a tax professional. How they did it? The geniuses simply took the basic features of professional tax software, the most common forms, the most common deductions, the most basic credits, and packaged it as do-it-yourself tax software. Even if it started slow, it really caught up and quickly millions of taxpayers abandoned their tax advisors and cheated with Turbo Tax, Tax Cut and the like.

For a much lower fee, John Doe could now prepare his own taxes at 2:00 in the morning, enjoying a fresh cup of coffee at his kitchen table. No more going to the tax professional, no more waiting days for returns, no more paying high fees, finally FREEDOM (the only problem with these packages is that you actually had to buy software and install it on your hard drive before you could use it) So you could only use it on your own computer). Sending the returns to the IRS, as before, was done by printing, signing and mailing. For tax preparers, this was a surprise, the sky is falling and no one needs us anymore…

Help, it came from an unexpected source, the government. As tax software has become easier and friendlier to use, tax laws have become much more complex. So for many taxpayers with simple returns, the DIY solution worked pretty well, but more than anything, the lack of advice from a tax advisor resulted in mistakes, higher taxes, and more IRS audits. Tax preparers are safe again. For now…

E-file and Online Tax Filing, the new best-selling products today

To make matters worse for tax preparers, a “savant” invented something called the Internet. At first, the tax industry didn’t really pay much attention to it, but then, remember those computer geeks from back in the day, they decided to take DIY software and offer it as web-based software. BOOM. Not only that a taxpayer can prepare their return without a tax preparer, but now they can do it even without buying software, from any computer, anywhere, anytime.

Then the last straw came, the government decided to allow taxpayers to transmit their tax returns over the Internet, instead of printing and mailing them. They called it E-File. BINGO. Taxpayers who filed their return electronically, considered VIPs by the IRS, received their refund days faster than everyone who mailed tax returns. The IRS even asks lower-income taxpayers to file E-File allowing them to do so for free, with no transmission fees. And as for the mail in your statement?

It’s gone, no more papers, no more post office.

New names popped up, TaxSlayer.com, TaxAct.com, while old, familiar names suddenly went online: TurboTax Online, TaxCut online. They all started fighting over the online taxpayer. Prices for those solutions range from FREE to over $100 and depend on the complicity of the return. Most of them are what industry analysts describe as form-based. It means that the software will take you through the form that you need to fill out, ask for the relevant data, and plug you into the form itself. This approach works well when it comes to very basic returns, but with more complex returns that includes self employment income, home sale, investment or rental properties and other less common issues, a better approach is the “Real-Life-Event-Tax- Guide”.

“Real-Life-Event-Tax-Guide”: the future of tax filing is here…

When you try to think about what you’re looking for in your online tax software, you quickly discover that you’re looking for more than just “forms-based” software. He wants his online solution to really understand you and your tax situation. You want a partner who can advise you on how to save on taxes and how to maximize your tax benefits from everything that happened to you during the year.

For that reason, several online tax companies are developing the “Real Life Events Tax Guide”. By using such a solution, you will be asked to talk about the events that affected you in the year, marriage, new baby, moving to a new house, starting university, change of employment status, etc. You can also choose from a list of events already identified by these websites. When you do, the website will explain, guide and advise you on how to maximize your tax benefits related to this event.

For example, under the event “we had a new baby”, you will be informed that “the first tax relief you wish to claim is an additional dependent. To do so, provide the full name of the new baby (as it appears on your social security card ), social security number, relationship (son, daughter, minor, etc…) and check the CHILD TAX CREDIT box as long as the child is under 17, is a US resident, lives with you more than half the year and you provide more than 50% of their annual income Third, if both parents were working (or one of them was a full-time student), you can claim the Child and Dependent Care Credit if paid for someone else to do child care Use form 2441 to report qualified child care expenses and the credit.”

“A la carte advice”, where the future takes us.

Where do we go from here? I believe the future lies in online tax solutions that offer their users to ask any tax question they may have, while preparing their return or planning their taxes, and pay only for that question. This “Advice on Demand” feature allows taxpayers to take advantage of the low rates of filing taxes online, while having full access to experienced tax advisors who can save them a great deal of tax money, correct errors in their statements and give them so much more. I needed the confidence that they are requesting the highest refund possible and that their return is 100% correct with the least risk of an IRS audit.

Conclution

The way Americans prepare and file their annual tax returns has changed dramatically over the years. No one can really foresee the future of tax filing, several companies have already developed a new approach that seems like the beginning of the future. With “Real-Life-Event-Tax-Guide” and “Advice-On-Demand”, the company offers its users the best of both worlds: a unique, easy-to-use, event-based, online filing solution low rates and the benefit of an experienced tax professional who charges only for the information users need.

HAPPY TAX SEASON EVERYONE.