The Future of Tax Filing
The way in which taxpayers have already been preparing and submitting their tax statements to the government has changed throughout the years. It started with manual filling of IRS forms by tax advisors, continued with the growth of professional tax software that do a lot of the calculations for your tax preparers (allowing them to focus on tax advisory and planning) and ends with the newest trend of e-filing, that enables taxpayer to make their particular tax return without having to use a tax professional and submit their tax returns straight to the authorities online!
So, where do we go from here? Is e-file taking 100% in the industry? Is definitely the tax preparer profession doomed? Some believe the future of tax filing is really a combination between online tax software with "real-life-event-approach" and direct access to live tax professional for on-demand advice.
Back in the past...
Before e-file and before tax software it had been the tax professional who collected the appropriate data from the taxpayer (which often brought a shoe box full with tax, bills and receipts information) and then spend hours (otherwise days) to manually complete each of the tax forms necessary for the internal revenue service and calculating each and every line in each and every form. This extremely time-consuming task, done to the sunshine of several candles understandably, left little time for tax advice or tax planning, resulted in more errors and led to longer processing time for a refund.
Computers, the super heros of the tax industry...
When computers arrived towards the scene, the tax industry has slowly started change. Tax professionals, who quickly adopted the new comers, could actually prepare a return faster along with less errors, mainly because of the utilization of basic spreadsheets that made tedious calculations a significantly easier engagement. However it was still a manual process to fill out the actual tax forms, and mailing them to "Big Brother".
Professional Tax Software - the real change maker...
It had been not until professional tax software became available, if the industry saw some really big changes. Those new creatures enjoyed a library of tax software in them, permitting users to key in, add, erase and change the tax data, and then print an entire return, all done on the computer. No more manual. Wow. Suddenly, tax preparers was without to do any manual form filing, any manual calculations; it had been all performed by the application.
The preparer was responsible for collecting the data, entering it to the software and after error proofing, just click to print and "halleluiah", it's all able to be filed. Still submitting the return was completed by the old fashion, Usa post office.
This new development allowed the tax advisor to pay attention to tax planning, maximizing the taxpayer refund and exploring the overall picture, since all the manual work has become taken from the software.
Consumer Tax Software - can they do-it-themselves?
Right after the professional tax software idea proofed to achieve success, some computers geeks made a decision to carry it to the next level and allow just about any John Doe to behave like a tax professional. How did they do it? The geniuses simply took the fundamental features from your professional tax software, the most common forms, the most common deductions, the standard credits and package it as being a do-it-your-self tax software. Even though it started slow, it trapped and quickly millions of taxpayer dropped their tax advisors and cheated with Turbo Tax, Tax Cut and alike.
For far lower fee, John Doe, could now prepare his own taxes, at 2: 00 o'clock each day, having a fresh cup of coffee at his kitchen table. Forget about, visiting the tax professional, forget about waiting days for the returns, no more paying high fees, finally FREEDOM (the sole issue with these packages is you needed to actually purchase a software and install it on your hard disk drive before you can use it. So, you could only use it at your own computer). Submitting the returns for the IRS, as before, was completed by signing, mailing and printing. For that tax preparers, it was a shocker, the sky is falling, and nobody needs us any further...
Help, arrived from an unexpected source, the us government. The tax laws became much more complex, as the tax software became easier and friendlier to use. So for many taxpayer with simple returns, the do-it-yourself solution worked pretty well, but more all others, the lack of advice from a tax advisor, resulted in errors, higher taxes, and more IRS audits. Tax preparers are safe again. For now...
E-file and Online Tax Filing, today's new biggest sellers
To help make things much worse for your tax preparers, some "wise-guy" invented something called internet. Then, remember those computer geeks from before, they decided to take the do-ityourself software and offer it as web-based software, although at first, the tax industry did not really pay much attention to it. BOOM. Not only that a taxpayer can prepare the return without having a tax preparer, she or he, can now get it done even without buying software, from your computer,
anywhere at any time.
Then your last straw came, the us government chose to allow taxpayer to deliver their tax returns via that internet thing, as opposed to printing and mailing them. They called it E-File. BINGO. Taxpayers who E-Filed their return, considered VIP by the IRS and received their refund days faster than all them tax statements mailers. The Internal Revenue Service even solicits taxpayer with lower income to E-File by allowing them to practice it free of charge, no transmitting fees. And as for the mail within your return?
It's gone, no more papers, no longer post office.
New names sprouted, TaxSlayer.com, TaxAct.com while old and familiar names suddenly changed to online: TurboTax Online, TaxCut online. All of them began to fight within the online tax filer. Prices of the solutions range from FREE to over $100 and depend upon the complicity in the return. Many of them are what industry analysts describe as Form-Based. It means that the software is going to take you through the form that you should complete, ask you for the applicable data and plug it in 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 way forward for tax filing has arrived...
Whenever you try to think the facts that you are looking for from your online tax software, you quickly find out that you are looking for more than simply a "form-based" software. You want your web answer to really understand you and your tax situation. You will want partner that could advice you the way to reduce taxes, and how to optimize your tax advantages of everything that happened in your during the year.
For that reason several online tax companies are developing the "Real-Life-Event-Tax-Guide". When you use this type of solution, you will be asked to speak about the events that affected you around, marriage, newborn baby, move to a new house, started college, changed employment status, etc.. You can even pick from a listing of events already recognized by websites like these. When you accomplish that, the web site will explain, guide and advice you on how to optimize your tax benefits associated with this event.
As an example, underneath the "we enjoyed a newborn" event, you will be informed that "the very first tax break you want to claim is additional dependent. You accomplish that by listing the newest baby's full name (since it appears on his/her social security card), social security number, relationship (child, son and daughter etc...) and view the kid TAX CREDIT box provided that the kid is under 17 years of age, is a United states resident, lives together with you more than half of year and you also provide him/her more than 50% of his/hers annual income. Thirdly, if both parents were working (a treadmill a full time student) you are able to claim Child and Dependent Care Credit should you paid for somebody else to look after the kid. Use form 2441 to report the qualified child care expenses and the credit."
"Advice-On-Demand", where the future leads us.
Where can we move from here? I believe the near future is within online tax solutions that offer its users to ask any tax question they might have, while preparing their return or performing some tax planning and pay simply for that question. Still get full access to experienced tax advisors that can save them a lot of tax money, error proof their returns and provide them the much needed confidence that they ask for the highest possible refund and that their return is 100% correct with the lowest risk of IRS audit, although this "Advice-on-Demand" feature allows taxpayer to benefit from the low rates of online tax filing.
The way Americans have prepared and filed their annual tax statements has dramatically changed over the years. No person can really foresee the way forward for tax filing, several companies have already designed a new approach seems like the starting of the long run. With "Real-Life-Event-TaxGuide" and "Advice-On-Demand", the organization offers its users the very best of both worlds: unique user-friendly, event-base, online filing solution at rates that are low and the main benefit of a skilled tax professional that charges only for the details users need.