- Image credit: Fast Company Digital Tax Prep Tools
A Key Component of the Digital Tax Practice is OCR
Tax preparation has come a long way since the days of service bureaus, couriers and paper forms. Personal computer-based tax software allowed tax returns to be prepared entirely in-house. Now, some tax document automation solutions are allowing firms to embrace a completely digital tax practice. Through Optical Character Recognition (OCR), source documents like W-2s, K1s and brokerage statements can be scanned and automatically bookmarked and organized. Then, the relevant tax data from those source documents can be exported to tax software.
If your goal is increased efficiency, the time you save with a Digital Tax Practice by not having to organize your files and key punch data into tax software is important, very important, but it isn’t the most important component of a truly automated digital tax practice. To understand the most important component, think about how and when a 1040 tax return flows through your office.
File Types and Workflow in a Digital Tax Practice
With most tax document automation solutions the process works like this: You scan the paper documents that were provided by your client then you run the scanned documents through OCR.