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Do I Need Tax Resolution Software?

A New York Library window decal encouraging taxpayers to pay their tax there

Each week I am asked what tax resolution software I use and if it is necessary. Tax resolution software helps make your tax representation workflow more efficient. Think of it in terms of tax preparation software. You need to know how to do the forms, but the software handles most of the heavy lifting as far as calculations.


But it also allows professionals to be lazy. Because tax preparation software does a lot of heavy lifting it allows tax professionals who don't know what they are doing to complete tax returns. The result, more tax representation work for me because software mistakes won't be caught. Tax resolution software is the same way.


It helps make you a bit more efficient by doing calculations. It also helps you with ensuring the information flows through to the proper forms. The difference between tax resolution and tax preparation software is that paid preparers are now essentially required to have tax software. Tax returns have to be e-filed. Tax resolution forms are not submitted electronically. So having the software is not an IRS requirement for tax professionals.


If you are just starting out I do not believe you need tax resolution software and here is why:


Tax Resolution Software Analyzes Tax Transcripts

This sounds like a perk but if you are just starting it's a hindrance. Why? You'll never learn to read the transcripts and analyze them on your own if you rely on the software. When your software makes a mistake, and it will, you won't be able to catch it.


There are 5 things that every tax professional should be able to find in their client's account transcripts. All tax resolution software finds these and calculates them for you. If you can't find these 5 things on your own, it is my recommendation that you do not invest in tax resolution software yet. Here are the 5 things.



If you don't know how to use these things to help your client check out this article, The ASED, CSED, and RSED: How They Affect Your Client that Owes Back Taxes. The following podcast episode will also help you with what to do with the penalties after you calculate them.




Tax Resolution Software Populates Forms and Resolution Options


Once you use tax resolution software to pull and analyze the tax transcripts it will do another step. It will take that information and create reports. These reports will propose resolution options for the client. For example, penalty abatement and/or bankruptcy. Imperfect humans have created tax resolution software, which means it is bound to make mistakes.


If you do not know how to read the transcripts and determine which penalties are eligible for abatement you should not be investing in tax resolution software.



If you do not know how to fill out Form 433-A or Form 433-F by hand, you have no business investing in tax resolution software.


If you cannot look at your client's account transcripts, compared to their financials, and determine what negotiation options they qualify for you should not be using tax resolution software.


You will end up messing someone up more than helping them. Once the software makes a mistake you won't even know where to go to look for the mistakes. The best teacher is doing the forms by hand in a real-life situation. I do highly recommend having a mentor to help walk you through this process and support you, to ensure that you're not making situations worse. If you're looking for that type of mentorship and community right now, the doors to my community are open - Enrolled Agent Mentorship Family.


When Should You Invest in Tax Resolution Software?


Software to help you enhance your client experience and make your process better is an investment. Cheapest may be best for your pocket but not best for your practice so keep that in mind as you begin shopping. If you are new to tax representation work and do not consistently have clients I do not think you should invest in tax resolution software. Yes, one client should pay for the software if your average fee is $5,000.


However, you won't learn everything that you need to know after one case. I would say once you are consistently getting 2 clients a month you can invest in software. But perhaps you're in my mentorship program or another great program and you are getting clients quickly. I would still say that you need to analyze at least 25 -50 account transcripts by hand before using the software. This will teach you how to read them.


Especially if your focus is on tax representation. 2 clients a month will not take much time out of your month. I know professionals who have more than 5 clients a month and they don't use software. So it is possible to have a bigger practice without using software.


I am not against it. I use it in my firm. But I believe you should know what you're doing before investing in it. It should enhance your work, not do all the work for you.


So make sure you have these things before making the investment:

  • Know how to read tax transcripts

  • Have a consistent client base

  • Know what you want in a tax resolution software


Now It's Your Turn


1 - How many tax account transcripts have you analyzed? At what point do you feel you should do before you feel comfortable analyzing transcripts?


2 - What makes you feel like you have to have software to do representation work? What's your biggest fear about not having tax resolution software? There's no wrong or right answer.


3 - What tax resolution software(s) would you like for me to review here on America's Favorite EA and the YouTube channel?


4 - What's on your dream list for tax resolution software? Do you need to be able to white label? Communicate with clients? Send invoices? Lay it all out here before you start shopping. This will assist you as you move forward to find what meets your budget and expectations.


 

Timalyn S. Bowens EA is America's Favorite EA and Tax Expert who will work hard to find a customized legal solution for you! As an Enrolled Agent licensed through the Internal Revenue Service Timalyn is able to fight the IRS for taxpayers in all 50 states. As the host of Tax Relief with Timalyn Bowens and a YouTube content creator she empowers taxpayers to make educated decisions about their tax situation.

When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At Bowens Tax Solutions, we serve our Louisville-area neighbors by providing the tax services and knowledge needed to succeed. We are here to assist you with your tax issues and preventative care. Visit our website at www.bowenstaxsolutions.com for more information.


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Kerrina
5 hours ago
Rated 5 out of 5 stars.

1. I’ve analyzed 2 transcripts so far. One of my own client. And 2 of my B2B clients’ but it wasn’t a full analysis which is why I value them at .5 each. Lol (There’s probably more if I think about it but I can’t easily remember right now) I would love a zoom on transcript analysis- what to look for and etc. I’m more visual.


2. My understanding is that tax resolution SW makes the work easier. Biggest fear is taking too long to analyze- because I don’t know everything I’m looking for. And don’t want to miss something that may help the client.


3. I guess all the major ones and some not so mainstream. Pitbull, Canopy, IRS…


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Ikedikings
2 days ago
Rated 5 out of 5 stars.

A very insightful writeup!

Topical discourse meant to guide tax professionals in making the right choices when duty calls.

I strongly believe that working with a dependable tool, lightens the burden of efficiency, not the contrary.

Deeper knowledge about manual tax transcript reading and analysis makes the difference...


Thank you for sharing.

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