Paradigm Shift: Will the Internet Revolutionize Your Practice?

The accounting and tax profession is currently experiencing a new technology-based paradigm shift—the migration from Windows based PC applications to the Internet. This is not the first new paradigm to affect all practitioners. Indeed, the evolution of tax preparation exemplifies the technological transition we now face.

Many tax practitioners will recall preparing tax returns manually—and, surprisingly, even today a small number of returns are still prepared by hand. By the Seventies, the increasing complexity of the tax laws, coupled with the commercial availability of the mainframe computer, led many tax practitioners to abandon the manual preparation paradigm in favor of the input-sheet driven, mainframe computer-based service bureau. Then, in 1981, new technology clobbered the service bureau.

The IBM PC was born, and the next paradigm shift, from the service bureau to the DOS-based PC would again transform tax preparation, and our entire professional practice. Of course, the service bureaus did not disappear overnight. Dynatax was still around as late as 1987, and CCH Computax lasted longer still. Many practitioners will recall how older partners in accounting firms vowed that no accountant would ever type tax return data into a PC. The moral of the story: no one, not even a Big 8 or Big 6, 5, 4… partner could suppress a superior technology platform. The eventual demise of the service bureau was inevitable as industry leading PC-based software programs, such as Micro Vision Tax Relief and a few others who still remain, sprung up like wildflowers.

While DOS-based tax preparation was dubbed by many tax practitioners to be the final frontier, a new technological paradigm would emerge once again in the late Eighties—Windows. As accountants trained in professional skepticism, many of us were in complete denial and said we would never switch—“DOS is more reliable. DOS is faster. DOS is easier. Windows needs too much memory. Windows requires too much space.” Remember the other excuses? Denial is part of the human psyche, but it can only delay change, not prevent it. Indeed, the final shift from the DOS to the Windows paradigm seems to have occurred in 1998, really not that long ago.

However, the seeds of the next paradigm shift are already being planted now by today’s newest technological revolution. The Internet will once again radically transform the way taxes are prepared and the Net will have an equally profound impact on the entire accounting profession.

Within the next five years–ok, maybe 7 or even 10, but the inevitability is certain and that is what is important here–PC and accounting applications will cease to be distributed on CD-ROM and at a minimum we will soon be entering our data on an input screen on the Internet provided by our tax software vendor. Tax practitioners will no longer have the responsibility of updating tax software, as we will be directly accessing the servers of our tax software developers, just like we did in the service bureau days! Ironically, the evolution of technology appears, in many respects, to be bringing us back to the days of the service bureau—but with ultimate convenient access and control in our hands.

Pricing for tax and accounting software will follow a new Application Service Provider (ASP) model as well. Of course, a few things will have to happen first —namely more high speed Internet connectivity, better reliability and perhaps increased Internet security—but happen they will. Don’t believe it? If we think real hard, as skeptical accountants we can build some great cases of denial, as we always have and are trained to do. But we cannot stop the certain march of technology, and we shouldn’t try to. Our energies will be much better harnessed if we instead prepare for and profit from the transition, which is what the AccountantsWorld community is here to help us with.

This is just the beginning. According to Forrester Research, of the 106 million households in the United States, 58 million are already connected to the Web via regular dial-up modem connections. An additional 11 million have high-speed connections (cable and DSL). So, 60% of the US is already Internet hot-wired and by the end of the year that penetration is projected to grow to 70%. While it is hard to imagine the day that our clients will use the Internet to prepare their own taxes, it is easier to foresee the day when some clients prepare Internet-based tax organizers that feed directly into our Internet-based tax programs. And it doesn’t take too much imagination to predict that in the not so distant future major 3rd party tax reporting entities such as employers, banks and investment companies will directly transmit taxpayer data to the tax preparer or the application service provider—the ultimate conquest of electronic filing.

Paradigm shift, anyone?

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