Thursday, July 30, 2009

Pencil or PC?

When I was 9, my family got our first computer for Christmas. I spent countless hours on that DOS machine with its dot matrix printer. Three years later, we bought our first Windows PC. I was in heaven.

I could not imagine life before Word and Excel, nor could I imagine tax preparation without software. When I get frustrated upon running into a software glitch, I have to remind myself that the software really hasn't been around that long, so many a problem still need to get fixed.

Robert Flach, The Wandering Tax Pro, discusses the benefit of preparing returns by hand. Joe Kristan and Peter Pappas share their contrasting views on the matter. My take on the conversation...

I'm passionate about tax accounting. When working on a return, I want to understand every number, the flow of the return, and the law behind it all. And I've always been that way.

I got my Master's in Tax before entering the profession, so I had a pretty solid foundation when I started. But for many accountants, their background tax return is minimal when they enter the big bad world of public accounting. It takes time for them to get familiar with how a tax return works. And in the meantime, the work still needs to get done.

As I mused the other day, I think we're better off if we delegate initial preparation to less experienced preparers, with the experienced professional reviewing the work. Tax prep software speeds up this process. Software will never replace the need for a qualified professional exercising judgment, but it can be a great tool.

I love having the speed and efficiency of software, while at the same time understanding the forms and law behind them. It's the best of both worlds.


  1. I like your thought process. Here the return is done by understaff personal, then orinted and reviewed by had, usually mine.

    The use of software has decreased prep time and has allowed for growth, and more income.

    Like you said "Software will never replace the need for a qualified professional exercising judgment, but it can be a great tool."

    "... having the speed and efficiency of software, while at the same time understanding the forms and law behind them."

    "It's the best of both worlds."

  2. Monica-

    Thanks for adding your voice to the discussion.

    As I mentioned in my comment to Joe Kristan I wanted to make three points with my post-

    1. Tax software is not a substitute for knowledge of the Tax Code - for either a taxpayer or a tax practitioner.

    2. Even a computer-generated tax return needs to be carefully and thoroughly checked – in the same manner as one would check a manual return. One should not assume that just because a computer has generated a tax return that it is automatically legally or mathematically correct.

    3. It is very important that a person training to be a tax preparer learn how to prepare tax returns by preparing them manually, as Chuck McCabe has agreed. It is when a person does not learn actual tax law or manual preparation of a 1040, but simply learns how to properly use a software application, that he/she is merely a glorified data entry clerk and not a real tax professional.

    You obviously agree with Point #1. It appears you did things the right way - you learned the Tax Code and the 1040 first and then learned how to use tax software.

    What are your opinions on Points #2 and #3?


  3. Hi Robert -

    Thanks for the comment. My thoughts on your question...

    #2: I agree that a computer-generated return definitely needs to be reviewed carefully, just as carefully as a manual return. I've learned how important it is not to simply "trust the software." I review every page of a return before finalizing it!

    #3: This one I struggle to answer concisely, as I see several issues at play here. One question is how we define a "tax preparer." If this is someone on a career path to review tax returns, provide tax advice to clients, and so forth, then the person definitely needs a solid understanding of both tax law and tax returns. I would argue it is not necessary to prepare a manual return to gain this understanding, provided the preparer genuinely studies the tax forms and understands exactly "what input went where."

    In public accounting, entry-level staff may prepare returns with little understanding of the law, the returns, source documents, etc. If this person is not fully invested, and just wants to get the return done (accurate or not) and on to the reviewer, then one could easily argue this person is a glorified data entry clerk. The difference I find is in the individual. I've been fortunate to work with several staff tax preparers who really study the forms, the source documents, the software -- and then come to me with great, thoughtful questions that show just how much they are learning and continue to learn.

    We agree that true tax professionals must learn the law and the returns. The question, then becomes how best to teach this. I believe manual return preparation is only one of many potentially effective ways.

    This concept of how best to educate accountants is actual a favorite of mine, one I contemplate often, brainstorming ideas along the way. Hence, my rambling.

    I would like to further explore the idea of how to most effectively teach/learn the tax concepts required of a tax professional. If you or anyone else has any recommended material on the topics, I'd love to see it!

  4. use a computer software is saving our time. but good and quality software for filing taxes aren't free ( -is free and good tax tool).but you should have own head to check all and after that to send to IRS