Tax firms seeking growth often shy away from 1040 orphans due to their low margins and time commitment. However, with the right 1040 tax return workflow, these returns can become a significant revenue stream.
In this blog, I’ll outline the exact workflow that will minimize the involvement of onshore tax staff, allowing tax firm owners to process 1000+ returns without a major time investment efficiently.
Tax pros often dread tax season because they find themselves trapped in a cycle of chasing more clients every year. Amid the talent shortage, it is hard to find skilled talent onshore. Even if they do, the overhead costs don’t match with old-age tax return pricing. A smart way out is to add advisory services or complementary offerings like bookkeeping.
Chasing high revenue, many tax firms avoid the orphan 1040 tax return market.
Between the short tax seasons, increasing tax notices, clients refusing to pay more, and ever-changing tax laws, tax firm owners often struggle to make stand-alone 1040 returns profitable.
Many, many firms are offloading “orphan” 1040s and only keeping those linked to entities or advisory services. You see it everywhere on TaxTwitter and Reddit—tax firms aren’t prepared to take on the “simple” clients anymore.
If someone wanted to build a 1040-focused tax firm, there’s definitely plenty of work out there. But the challenge lies in providing more value than just the “peace of mind” of working with a professional.
The simple work is becoming increasingly commoditized.
So, what’s the logical solution?
Take on more and more 1040 clients, while ensuring minimal time and costly resources are spent on them. This is where high-volume returns present a real challenge.
TurboTax and H&R Block have cracked the code for catering to these clients with streamlined systems, and so can you.
The solution?
Yes, I’m talking about partnering with an offshore tax team that has the system of 1040 workflow figured out.
Credfino helped a tax firm ramp up from 300 to 1,000+ 1040 tax returns this year. Want to set up your own 1040 shop? Schedule a call to see how we can help.
Let’s break this down with the time and work concept:
Imagine you have 100 units to complete. One person can make 2 units per day, meaning it will take 50 days to finish the job. But what if the deadline is only 10 days away?
What do you do? You hire more people, right?
But what if no one else in town is eligible of doing the work? The solution? You bring in workers from outside the town. To meet the deadline, you’ll need to deploy five workers instead of one.
The same logic applies to tax season. The work isn’t going anywhere, and the time isn’t increasing. It’s a seasonal crunch. So, you need to prepare and bring in extra hands to get the job done.
With the talent shortage being nationwide, sometimes you need to look beyond your borders. Offshore tax prep staff are your solution to meeting deadlines without sacrificing quality.
To kick things off, map out your 1040 tax return process and involve your key team members to identify any bottlenecks.
Here’s what an ideal 1040 tax return workflow looks like:
Managing 100 clients manually and single handedly might not seem like a big deal, but when the numbers increase to 1,000, things can start slipping through the cracks. Tracking the status of clients’ submissions and managing missing documents can quickly become a challenge. This is where tax workflow technology and automation come in.
For preparation work, the offshore team can handle high-volume returns efficiently. Learn how to use an offshore tax preparation team for large volumes of tax returns here.
Now, let’s dive into the workflow.
Fir this scenario, clients can be categorized under 2 categories– new and existing. For existing clients, simply send the engagement letter via email. For new clients, however, a discovery call with client-facing staff is crucial to assessing the complexity of their return.
You can also streamline the process by sending a client intake form through software like TaxDome, which offers interactive forms. Once you gather the necessary information, you’ll be able to determine the complexity of the 1040 tax return.
For example:
Every return has its own unique factors, so it’s crucial to evaluate each one carefully to determine its complexity. You can even charge a fee for the booking and intake interview to assess the scope properly.
Once the client is onboard, the tax return workflow kicks off. Tax software automation will automatically send the engagement letter, including the 7216 disclosures, 8879 form, and organizer to collect the necessary information.
At this stage, additional automation can be implemented—such as reminders for the filer to sign the engagement letter, triggered after 4 days or twice a week, ensuring smooth progress without manual intervention.
At this stage, you need to ensure that you gather all the necessary financial documentation from the client to accurately file their tax return. This includes but is not limited to, W-2s, 1099 forms, proof of income, interest statements, investment income details, and any other supporting documents like receipts for deductions or credits.
Once the client submits their documents, the next step is to verify that everything required for the return has been provided. This includes confirming that all income documents (W-2s, 1099s, etc.), deductions (mortgage interest, charitable donations), and any other necessary forms (such as 8862 for earned income credit) are included.
Document management tools automatically flag any missing or incomplete documents and also remind the clients by mail to share the same.
Use automated tools like TaxDome to send a checklist, making it clear what specific documents are needed. The best part of having automation in place is that the client would receive automatic reminders about the missing document.
For instance, a client forgot to share SSN. The system will remind him to share the same and keep on doing so unless all information is received from the client. Tax software allows you to control the frequency of reminders.
Set expectations clearly with the client about timelines for submitting these documents and follow up with automated reminders if necessary. The goal is to minimize back-and-forth communication, avoid delays, and gather everything you need for accurate and timely filing.
This step helps prevent delays later in the process and ensures that you’re not scrambling at the last minute to gather necessary documents.
Once all documents are received, tax preparation of 1040 moves to the next step.
Credfino offshore tax team helps with setting up tax workflow as well. Get in touch to know more how we can help.
For the preparation of 1040 tax returns, you have two options: hire onshore staff or partner with an offshore team at a fraction of the cost. Given the simplicity and commoditized nature of orphan 1040 returns, outsourcing the preparation work to an offshore team is a smart and cost-effective choice.
The offshore team seamlessly integrates into your firm’s operations, trained to follow your established processes and workflows. Offshore tax team handles most of the work—data entry, calculating deductions and credits, and completing essential forms like W-2s, 1099s, and Schedule A—while ensuring accuracy and consistency.
However, it’s important not to focus solely on cost savings. Don’t settle for the lowest price offshore tax preparation service provider. Instead, partner with an experienced offshore team skilled in managing high volumes of 1040 tax returns. With the right offshore team, you can manage a larger client base without compromising the standard of service you provide.
Once the return is prepared, the next step is the review. In traditional outsourcing models, this step is handled by onshore staff, often causing bottlenecks and delays.
By integrating an offshore tax team for both preparation and review, you can eliminate these inefficiencies. With an integrated team, returns reach the reviewer nearly finalized, requiring minimal adjustments.
After completing the preparation and review process, the return reaches your desk. The next step is to evaluate whether it looks good. At this stage onshore team, the accuracy and completeness of the tax return. If everything aligns with the client’s information and there are no discrepancies, you can confidently move forward to the next step in the process.
However, if any corrections are needed—whether it’s due to missing information, data entry errors, or inconsistencies—send the return for revisions.
Once the tax manager approves the return, it can automatically be shared with the client through your system. This eliminates delays and reduces the need for manual intervention, ensuring that the client receives the return promptly.
By automating this handoff, you not only save time but also enhance the client experience. The client is kept informed and can easily provide feedback or approval, which helps move the process along swiftly. Once the client approves the return, the process proceeds smoothly toward filing, without any bottlenecks or unnecessary delays.
This is the point where the client formally acknowledges that the return is accurate and ready for submission.
To ensure a smooth process, make it easy for the client to approve the return. Utilize your document management system to send the finalized return for client review, along with any supporting documents or explanations needed. Whether through a secure portal, email, or other method, make sure the approval process is straightforward and efficient.
the client has reviewed and approved the tax return; the next critical step is to file the tax return with the IRS. This process involves submitting the finalized return electronically.
Once filed, an automated email can be sent out to clients, confirming that their return has been filed and outlining any next steps, if applicable.
This message should also include a friendly reminder about the payment due for the services provided. Include all relevant details like the amount, payment methods, and the deadline to make it easy for the client to complete the transaction.
Make sure to use automated reminders as needed, ensuring that clients are reminded promptly about outstanding payments. This reduces manual follow-up and saves time, while ensuring consistency in your communication.
At Credfino, we understand the unique challenges that come with processing high volumes of tax returns. Our team is equipped to handle large volumes efficiently, delivering quality returns while adhering to strict protocols.
Here’s how we do it:
With Credfino, handling high volumes of tax returns becomes seamless, efficient, and reliable.
Let us help you set up an orphan 1040 tax shop. Schedule a call to get started.
Offshore accounting has been around for decades, originally born out of the rise of virtual accounting and the need to send work overseas.
How do you use an offshore tax prep team for high-volume returns? And why is there such a high volume of returns to begin with?
Tax firms planning 1040 outsourcing to India often come across myths like quality of work, legality concerns etc. This blog is all about facts!