1040 Tax Return Workflow for High-Volume Tax Returns

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: 

1. New clients schedule a discovery call
2. Clients sign the engagement letter
3. Clients submit necessary documents
4. Preparer starts the return once all documents are received
5. Reviewer checks and reviews the return
6. Return is shared with the client for review
7. Return is filed with the IRS
8. Client settles payment

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.

1. Initial Client Inquiry and Discovery Call 

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: 

• A simple return might include wage, retirement, interest, or dividend income. 

• A medium return could involve Schedule A with dependents, plus forms like 1040, Schedule A, 8867, W-2, and 1099-R. 

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. 

2. Request Signed Engagement Letter: 

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. 

3.Request Documents: 

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. 

4. Check Received Documents 

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.  

5. Tax Preparation of 1040

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. 

6. Review Return 

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. 

7. Check if the Return Looks Good 

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.  

8. Send Return to Client for Review: 

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.  

9. Receive Approved Tax Return from Client: 

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. 

10. File Tax Return with IRS: 

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.  

11. Communicate and Get Paid: 

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.