Back in the day, tax professionals and accountants worked a lot harder than they do today. Payroll preparation, for example, was a huge chore. Tasks that include accumulating and verifying the hours, calculating and withholding the taxes, preparing checks, presenting them for signature, and timely making the payroll tax deposits were all done manually without computers, with only the help of a calculator. Then the endless stream of paperwork involved with reporting payroll to the government on a quarterly and annual basis both for federal and state became an even more monumental task.
One day payroll software was invented. This invention brought more ease in payroll preparation. But the task of making tax deposits, meeting deadlines, and inputting payroll data into the general ledger still made it something of a project.
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But progress continues to work its magic. Payroll production has come a long way. Today, a business owner simply reports the hours each employee has worked. In-house accounting software that integrates payroll seamlessly to the general ledger and financial statements has taken the drudgery from the chore. Direct deposit of employee pay means the business owner doesn’t need to be around to sign checks. Direct deposit of payroll taxes and automation of payroll tax returns and year end W2s makes for stress-free accounting and not having to worry about deadlines and consequently, penalties.
And that’s just payroll.
Accounting for business income and expenses has become streamlined. “Today most accounting software products allow for zero entry of data,” says Doug Sleeter, founder and President of The Sleeter Group. “Downloading data directly from the bank or credit card companies reduces the amount of time business owners, their employees, or accountants have to spend entering data and reconciling accounts.”
Gone are the days when a business owner brought his bookkeeper or accountant the check register, credit card statements, bank statements and other source documents for compilation. Removal of this chore cuts down the amount of time professionals can bill for services. But instead of being phased out, a new direction and role in the business owner’s life has arisen. The tax professional can be tapped in areas that will improve the client’s bottom line. Sleeter says, “Tax planning is where it’s at.”
There is a rush of new demands in the internet world. Online payroll solutions, outsourced accounting services, accountants using accountant centric tools, where accountants download source documents, receipts, time sheets, bank records directly into the accounting system.
Sleeter adds, “Outsourcing to India was popular about ten years ago but it did not succeed because they did not have local knowledge and context. Today, outsourcing being performed by local firms moves the pros closer to the clients. We can provide better service because we are familiar not only with IRS doctrine but with state and local government requirements.”
Looking forward, Sleeter adds, “How much longer before the IRS starts connecting our data directly from the bank and credit card company to the IRS for analysis and return preparation? I think they already do this in other countries, like Sweden. The taxing agency prepares the tax return and sends it to the taxpayer for signature or review and rejection. Pretty soon tax professionals will no longer prepare the tax returns. The IRS will do it for them.”
“1984” is coming alive before our very eyes. I find something scary about this; the IRS having access to our banking information in order to compile our tax returns. Privacy invasion.
Another worrisome element is the auto download of banking information into accounting programs. I’ve seen it happen. Automation begets complacency.The business owner takes the bank’s word for it and doesn’t review the data. The details of day to day transactions can be overlooked and this could result in more easily being a target for identity theft. Don’t begin to trust so completely that you do not check the details of your company’s financial activity.
But these changes suggest a fairly accurate projection of the future of finance. It’s time to prepare for these continuing changes both as a business owner and as the finance professional who assists the business owner.
Make sure your accounting professional is fulfilling these objectives.