Traditionally, tax preparation was done by a single accountant. A taxpayer would give the accountant all of his or her source documents and let the accountant prepare the tax returns. The taxpayer, however, would usually have numerous source documents. For example, the taxpayer may have documents such as W-2s, Brokerage Statements, 1099s, K-1s, etc. The accountant would then have to sift through and manually organize the taxpayer's source documents. The accountant would have to transfer all of the tax data from the taxpayer's source documents into the appropriate federal and state tax return forms such as 1040, 1040 E-Z, etc.
With so many taxpayer source documents and different federal and state tax filing forms, the accountant would spend a lot of time organizing, transferring data, and verifying the data. This manual process can be inefficient, error prone and expensive since the accountant has to search for specific tax data to enter into a specific line in a specific tax filing document. Oftentimes, the accountant will have to reuse the same tax data over and over again, but has to reenter the tax data each time. Furthermore, with such a large volume of tax data, the potential for error increases, especially when a single human being is involved. With federal and state penalties increasing for mistakes, this could be disastrous for the taxpayer and the accountant. This problem is compounded when the taxpayer has to file taxes in multiple states and has multiple employers. From an accountant's perspective, this large volume of tax data also presents problems because of potential staff shortages. Not every person is qualified to handle and analyze the large volume of tax data. Thus, this restriction in qualified personnel can lead to staff shortages.
One potential solution is to convert the taxpayer source documents into an electronic form. However, simply scanning the paper taxpayer source documents to be manually read as an electronic image such as a large JPEG is inadequate because the taxpayer source documents would still be unorganized and there is no verification of the tax data. Furthermore, the tax data is not in any form that is easily accessible for automated processing. The accountant would only be able to view the data on his computer, but would still have to manually transfer the tax data to the appropriate federal and state tax filing forms. Thus, there is a need for an invention that better processes a user's taxpayer source documents.