Using practice management tools within tax software.

• Author: McMillan, Mary Ellen

Tax return preparation software involves firm management issues beyond technical tax return accuracy. Certainly, the bottom-line requirement for tax software is the ability to produce accurate Federal, state and local tax returns. But firms should expect more. Client service and professional productivity are now key issues for picking tax software. And, once the appropriate software is chosen, the management team needs to be involved in its implementation.

The return database

Tax return preparation databases have always contained information useful in managing a tax practice, but they could not be used without extensive programming. Now software vendors are using new underlying development languages that allow more flexibility. As a result, more information is available to those firms that know how to put it to work. Database capabilities help to manage the practice by --tracking tax returns by stage of process and due date; --eliminating redundant client lists and databases for marketing, mailings and due dates; --improving client service and quality control by identifying clients affected by new legislation or other planning opportunities; and --enhancing firm image with good-looking products.

Management teams may not be aware of the variety of information available from the tax software the firm already uses or understand its benefits. Although some management tools are geared to interactive professional use, others may be used by all firms. Investigating unused features should be part of the postbusy season's evaluation process.

Administrative tasks

Time, both administrative and professional, is the resource in shortest supply during t Many good stand-alone packages will handle administrative tasks, but they often require reentering information that already exists in the taxpayer's database. The best tax software will --give the current status and track returns. At a minimum, reports should be categorized by responsible person, stage of completion and activity. Ideally, the updates can be posted by the professional from within the tax software as soon as a task is completed. Look for flexibility in setting benchmarks. --monitor return due dates. Consider whether the package also tracks noncompliance projects for clients. --produce invoices. Instant invoice preparation may not be important to firms with newer practice management systems, but some firms can speed collections for individual tax preparation work (with little additional...