Jancura, Elise G.

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Woman C.P.A. Volume 47 Issue 1 Article 8 1-1985 Electronic Data Processing: Choosing Computerized Tax Preparation Aids Elise G. Jancura Follow this and additional works at: https://egrove.olemiss.edu/wcpa  Part of the Accounting Commons, Taxation Commons, and the Women's Studies Commons Recommended Citation Jancura, Elise G. (1985) "Electronic Data Processing: Choosing Computerized Tax Preparation Aids," Woman C.P.A.: Vol. 47 : Iss. 1 , Article 8. Available at: https://egrove.olemiss.edu/wcpa/vol47/iss1/8 This Article is brought to you for free and open access by the Archival Digital Accounting Collection at eGrove. It has been accepted for inclusion in Woman C.P.A. by an authorized editor of eGrove. For more information, please contact egrove@olemiss.edu. Electronic Data ProcessingChoosingComputerized Tax Preparation AidsEditor:Elise G. Jancura, CPA, CISA, Ph.D.The Cleveland State UniversityCleveland, Ohio 44102The computer, with its speed and reliability, is an ideal tool for use in the preparation of tax returns. Its speed makes it possible to handle many calculations quickly and, in most cases, the results can be provided directly on tax forms ready for filing.The continuing technical and economic developments in the field have lowered the effective cost of com­puterized tax preparation. Tax practi­tioners considering the use of com­puterized procedures have two basic choices: use of a computer service bureau or use of an in-house facility. The widespread availability of microcomputers and the accompany­ing increase in marketed software systems for both large and small scale equipment makes the choice of an in­house facility a viable alternative for even the smallest practice units. The choice between a service bureau or an in-house facility will depend upon a number of factors: relative cost, the profile of the practice (kinds and com­plexities of returns), and staff resources of the practice unit.Use of Service Bureaus to Prepare Tax ReportsWhen a service bureau is used, the returns are prepared at the service bureau based on data provided by the tax accountant and results (tax returns or schedules) are provided back to the tax accountant. This approach is popular with accountants who aren’t ready to deal with selecting and acquir­ing hardware and software, and with managing the installation and opera­tion of an in-house facility. These pro­blems are lessened considerably with the availability of microcomputers, but still must be addressed.Input (the client data) can be provid­ed to the service bureau in either batch mode or on-line (an option which is becoming increasingly popular). With the batch system, input forms are filled out for each client. These are then sent (by mail or through a pick-up service) to the service bureau which processes the input and sends the completed returns to the accountant. In most cases collating has been done and an instruction letter for the client and a bill is included. The accountant must, of course, check the return in some way to detect any errors in input.The on-line systems utilize computer terminals located in the practitioner’s office which transmit the information directly to the computer center. Data can be inputted directly from the infor­mation at the accountant’s office. This eliminates the need for input forms and reduces the possibility of errors since the information need only be handled once. The resulting return may be printed out on this terminal or the ser­vice bureau may print the return on its high-speed printer and also collate it. There are various options in the method of printing, paper used, etc.The initial review of service bureaus must establish whether their services are appropriate. Not all tax service bureaus handle corporate returns. In preparation of individual returns, some will handle more schedules than others. If the client base has a high incidence of certain types of tax schedules, the ability of a given service bureau to handle those schedules is a critical selection factor. In other cases, the relative cost of manually com­pleting those schedules the service cannot handle may be more than the savings obtained from selecting a bureau with a less complete service, but a lower price schedule.When evaluating service bureaus, price is, of course, important. Charges are usually quoted on the basic return, plus fees for individual schedules. However, price alone is not the only important consideration. Stability and reliability of the vendor should be assessed (how long has the service been in business, is it growing, etc.?).A fully computerized system has a higher cost but saves by requiring less staff time. Client instruction letters, labels, tax estimate vouchers, client in­voices, envelopes and other items may be charged for separately. Some com­panies have free pick up and delivery service. Mail service will add to the turn-around time. The complexity of the input forms has a bearing on how easy it will be to do them correctly. Can they be easily understood and filled out?Other special services may be available that may influence your choice of company. An important item to consider is how late and amended returns are to be handled. Collation, reruns and handling of errors are some other considerations. Turn-around time is an important item; some companies offer faster service (costs more). Pro formas (partially filled out input sheets) are another time-saver to consider. What type of training is available? Are there minimum fees, registration fees? What about supplies? These are all 30/The Woman CPA. January, 1985items to consider when evaluating a tax service.Installation of In-House Tax Preparation FacilitiesFor most tax practitioners the deci­sion to provide “in-house” computeriz­ed tax preparation facilities will mean purchase of pre-written tax software. For all but the largest organizations, the cost of purchased software will be less than the cost of in-house develop­ment (design, programming, testing, etc.) This is especially the case for the microcomputer (and even some minicomputer) environments.There are relatively few sources of concise and comparative listings of available software. The DATAPRO and Auerbach services are useful but not completely helpful to the tax practi­tioner whose knowledge of computers is somewhat limited.Among the tax accounting systems described in DATAPRO are:ALLTAX TAXING SYSTEM (Management Science America, Inc.)CORPTAX (Financial Decision Systems, Inc.)FEDERAL INCOME TAX RETURN SYSTEM (General Computer Systems Corp.) FORETAX (Information Systems of America, Inc.)SOFTWARE 1040 (1040 Soft­ware, Inc.)TAX PAX: THE 1040 PACKAGE (Program Systems, Inc.)TAX 1040 (Management Control Systems)TAX LINE (P B.S. Computing) PLAN 1040 (1040 Software, Inc.)Other useful sources of information are publications of the professional societies and various other accounting publications. Many software packages are designed for specific hardware and do not have any applicability elsewhere. In the small practice en­vironment the selection of the software will probably determine the choice of the hardware. In other cases, hard­ware availability will determine (or restrict) the choice of software.In selecting software, numerous fac­tors should be considered. A clear and accurate understanding of the accoun­tant’s practice needs is important because the first step is to seek out software which performs the specific functions needed. Processing needs are affected by the choice of schedules to be computerized, the volume to be processed, and the type of returns (federal/state/local; income tax/person- al property/sales tax) to be processed. Then factors can be considered such as the reliability and reputation of the vendor; the popularity (universality) of the software package (frequently an in­dicator of its acceptability); vendor sup­port for training, maintenance and updating of the software.Another complication in the pur­chase of any software package can be problems with warranties and copyright issues; because the packages are usually sold with a license to use “as is”, the user assumes all risks for the way the package operates and is limited in modifying the program. A critically im­portant factor in evaluating software is the vendor’s procedures for timely up­dating and maintenance of package programs and for distribution of these program updates/changes to pur­chasers of the software.For offices with substantial tax prac­tices, in-house computerized taxElise G. Jancura, Ph.D., CPA, CISA, is chairperson of the Accounting and Business Law Departments of Cleveland State University. She has served on the Computer Services Ex­ecutive Committee with the AICPA and as chairperson of the Computer Educa­tion Committee. She is a member of the Ohio Society of CPAs, the Association for Computing Machinery, AWSCPA and ASWA.YOUR OWN CUSTOM NEWSLETTERAn effective, soft-sell marketing tool with your name and comments within the body of several relevant stories your clients will read.FREE SAMPLES DETAILSWrite:B. J. Lemmon Co.3035 TownsendDallas, TX. 75229 214/783-3420preparation can provide savings in time and money. These savings usual­ly are not realized in the first year of use (when procedures are being developed and learned), but do occur in subsequent years of use.The choice between use of a service bureau or an “in-house” facility has to be made by each individual practice unit based on the needs by that unit. An in-house facility can provide greater flexibility and control for those tax prac­titioners who have a sufficiently large volume of tax work or who are willing (or find it feasible) to allocate the time and effort to acquire and manage such a facility. For practice units whose volume does not justify such expen­diture or whose staffing patterns do not support such an effort, the service bureau is an excellent resource. In either case, the efficiencies, and thus the cost reductions, provided by com­puterizing the preparation of tax returns are critically important in main­taining a viable professional service. ΩThe Woman CPA, January, 1985/31

Electronic Data Processing: Choosing Computerized Tax Preparation Aids

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Electronic Data Processing: Choosing Computerized Tax Preparation Aids

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