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Nov 1990

Local area networks and the tax department.

by Kling, Jerry

    Abstract- The activities of tax departments of CPA firms can be simplified by using local area networks (LAN). LANs allows CPAs to gain immediate access to the tax calendar, use on-line data bases, use a tax library to conduct in-house research, generate in-house management reports, and store and retrieve documents from previous years. The features offered by LAN software include electronic mail and dial-in capabilities.

Changes in technology have led most CPA firms to acquire microcomputers for use in several applications including processing tax returns, spreadsheet calculations, word processing, database projects, tax research with online information retrieval services (such as LEXIS), bookkeeping and accounting functions, and creating proposals for client services. How can any of the these tasks become easier to manage by using a local area network (LAN)?

A LAN is a group of computers linked to each other for the purpose of sharing information and equipment. It consists of a powerful microcomputer (called a file server) which is connected to several other microcomputers by cables. The software resides in the file server and is available for use by the other computers on the LAN. From a cost perspective, the computers in the LAN share software, data and additional equipment including printers and modems.

For the tax department of a CPA firm, the following tasks can benefit from LAN technology.

Database Program

Tax calendar. Many firms have a database program on an individual microcomputer that tracks the due dates of all clients' tax returns. Periodic reports are printed to allow users to identify workload requirements and to ensure that all returns are properly handled.

On a LAN every microcomputer station can have access to the tax calendar program. You may limit the access of the users to such a program by requiring passwords, and by permitting only certain people to make changes. Everyone else will have instant access to this information on the LAN but access will be limited to the right to look at and print the information that is on the screen.

LEXIS-type services. By using a modem a user can perform tax research using the LEXIS database (or another such service).

By using a LAN you can reduce the number of modems and dedicated servers allowing the LAN to act as a clearinghouse for such communications.

In-house research. You perform most research in the tax departments by using an internal tax library. A new era of information storage and retrieval is here, due to the storage power of compact disc-read only memory (CD-ROMs), the same discs used for stereo systems. These discs contain 550 megabytes of information, the equivalent of 270,000 pages of text, (which is more than the entire Encyclopedia Britannica), and can be read by a personal computer equipped with a special CD-ROM drive. Many tax information publishers have already produced CD-ROMs that duplicate the information of their tax publications.

Companies including Commerce Clearing House, Prentice Hall, West Publishing Company (publishers of the Tax Management Portfolios The Bureau of National Affairs), and Mathew Bender are working on LAN versions of CD-ROMs. This means that you will be able access this database information without paying "on line charges" for a LEXIS-type system and without entering a tax library. On the LAN, you will be able to share information with other LAN users, without looking for a volume that has been checked out of the library. This will be the equivalent of having a tax library behind every user. The information will be periodically updated by the publishers by simply sending LAN subscribers a new CD-ROM disc. The task of updating all former books, one sheet at a time will be eliminated.

In-house management reports. Some tax departments have developed or purchased software that tracks chargeable hours (time sheets) and produces various management reports as well as client bills. In a LAN environment, each user will enter his or her time charges from a local microcomputer station, the data is then summarized on the network and is used to automatically pull together timely department level reports and billings to clients.

Storage and retrieval of workpapers and tax returns from prior years. Most firms have some kind of file room set aside for storing prior years' working papers and tax returns. Many firms microfilm files before sending them to off-site storage. Although the quality and cost are factors to be considered, a number of companies such as IBM and Wang are working on systems that will allow users to store a visual image of the workpapers or tax returns on CD-ROMs using scanners that work like photocopying machines for computers (the information is copied once and cannot be changed). Once the information is stored on the CD-ROM a jukebox-type device will pick out the CD-ROM that contains the information requested by users on a microcomputer. In a LAN environment many users will have access to this information. The cost of such a system should decrease and the quality will improve as these companies perfect their technology.

Tax Preparation Programs

The history of professional tax preparation software has been as follows:

1. Mainframe computer input forms and off-site laser printing of the tax returns;

2. On-line access to the mainframe (by use of modems) for the purpose of making changes to the tax return, and in-house printing of the returns on laser printers;

3. Stand alone in-house microcomputer based tax return preparation software and in-house printing of the returns on laser printers; and, most recently,

4. LAN version in-house microcomputer based tax return preparation software and in-house printing of the returns on laser printers.

The LAN version of the in-house tax preparation software produced by Computer Language Research/Fast-Tax for CPA firms (the GOSYSTEM) permits you to make periodic updates to their software by using only one LAN computer. All the other LAN users benefit from the updates. Returns can be prepared on one computer and can be reviewed on the screen of another computer (without using any diskettes to transfer the information). The software displays the tax forms on the screen with the proper numbers computed and they are identical to the printed tax return. Therefore, there is no guess work, what you see is what you get. Instead of preparing input sheets, users prepare the tax returns on the screen and then print them on in-house laser printers. This method has saved time in the preparation process.

Electronic Mail

This feature of LAN software enables users to send and receive memos and messages. A beep and an on-screen message stating that messages are waiting appear on the screen when the user logs onto the LAN. This system can be used to remind users of upcoming events and due dates.

Dial-in from Remote Site

The dial-in capacity enables users to access the databases and other software on the LAN from home or a client's office by using a microcomputer with a modem.

The future of the LAN is bright. The ability to share information that is required by everyone and still be able retain the ability to produce your own work product is a very attractive concept. Many major corporations have installed LANs and new products for these systems are being planned by major vendors.

Jerry Kling, CPA

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