# SavingsMax Phase II — Tax Prep Module Scoping Addendum

**Author:** Rex (Tax Strategist)
**Date:** 2026-05-23
**Recipient:** Jimmie (primary) → Atlas (schema integration follow-up)
**Parent doc:** `Team Inbox/_Deliverables/Tax Planning Software - Scoping Doc.md` (Ledger, 2026-05-05)
**Status:** Scope-shift addendum; awaiting Jimmie's go/no-go on the business-model change before Atlas drafts schema integration

---

## 0. Why this doc exists

Ledger's 2026-05-05 scoping doc locked **SavingsMax Tax Strategy Planning** as a **planning-only** product:

> "Strictly planning — NO return preparation. No 1040/1120-S/1065 form generation; no IRS e-file integration; no signing as paid preparer. Each strategy hands off to client's CPA or EA for execution."

Today (2026-05-23) you asked about software that lets you **do taxes for your bookkeeping clients while tax planning for them as well throughout the year**. That collapses the planning + prep handoff into one J2-owned workflow. It is a different product, with different regulatory exposure, different software architecture, and different P&L economics.

This addendum scopes the **prep module** that bolts onto SavingsMax. It does **not** rewrite Ledger's planning scope — that work stands. It answers: *what changes when J2 owns the return, not just the strategy memo?*

---

## 1. The strategic case (why this is bigger than a feature)

**Standalone tax shops see the books once a year, in messy form, and prep is reactive.** You already keep books for these clients in QBO every month. That asymmetry is the entire product thesis:

| Lever | Standalone CPA | J2 (books + prep + planning) |
|-------|----------------|------------------------------|
| Intake | 6–8 weeks Jan–Mar of begging clients for docs | 11 months of clean books already on the shelf Jan 1 |
| Book-to-tax M-1 reconciliation | Painful, often surprises | Books were closed monthly with tax treatment in mind |
| Owner comp / QBI optimization | Discovered at year-end (too late to fix) | Monitored monthly, adjusted in real time |
| Estimated payments | Stale projections | Recalc nightly from actuals |
| Planning conversation | Disconnected from books — annual ritual | Continuous loop: every close updates projection |
| Turnaround | March–April | Drafts ready by Feb 15 |
| Client experience | Two relationships (bookkeeper + CPA) | One firm, one quote, one portal |
| Pricing leverage | Hourly or fixed prep fee | Bundle prep into the bookkeeping engagement → higher LTV per client |

**This is the J2 moat.** If we just buy TaxDome + UltraTax and prep returns like a normal CPA shop, none of the above shows up. The whole point of building rather than buying is to compress the books → prep → planning loop into one continuous workflow that no standalone shop can replicate.

If you don't actually want that loop and you'd be fine prepping in a standard tool, **buy TaxDome + Drake/UltraTax and stop here** — building is overkill. The rest of this doc assumes you want the moat.

---

## 2. The regulatory step-change (read this carefully)

Ledger's doc explicitly carved out "no return prep" because the moment you sign a return as paid preparer, three things change:

### 2.1 Practitioner credentials
- **PTIN alone is sufficient** to sign federal returns as a paid preparer. You have one.
- **But:** PTIN-only preparers cannot represent clients before the IRS in audits/appeals (beyond the return they prepared) and are not "credentialed" under IRS Circular 230 the way EAs/CPAs are.
- **Recommendation:** EA (Enrolled Agent) is the practical credential. ~3 SEE exams, no degree requirement, ~6 months prep. Confers unlimited representation rights. **Without this, you sign returns but can't defend them in an audit, which materially weakens the offer.**
- **State requirements:** Texas does NOT have a state CPA-like preparer registration for federal returns. (CA, NY, OR, MD do — relevant only if you prep returns for residents of those states, which is independent of where you sit.) Most J2 clients are TX → state-side regulatory burden is light.

### 2.2 Malpractice / E&O insurance
- Bookkeeping E&O ≠ tax prep E&O. Different policy class.
- Premium scales with: # returns signed, complexity (1040 vs. 1120-S vs. multi-state), highest single-client revenue exposure.
- Budget $3–8K/year for a 40-client book with mixed entity types. Get quotes before committing.

### 2.3 IRS infrastructure
- **EFIN** (Electronic Filing Identification Number) — required to e-file. Application includes fingerprinting and IRS suitability check. ~45 days.
- **E-Services account** — for transcript pulls, CAF (Centralized Authorization File), 2848/8821 power of attorney workflow.
- **Form 2848 / 8821** — required to talk to IRS about each client. Storage and lifecycle management is a real workflow.

**None of this is exotic — it's the standard onboarding to operate as a paid preparer.** But it's a ~60-day setup plus the EA path if you want to be credentialed (3–6 months). Build can run in parallel.

---

## 3. Build-vs-integrate decision on the prep engine

This is the central architectural call. **Do not let Atlas build a form-generation engine from scratch** — that path is years of work and ongoing regulatory maintenance (form updates every year, every state, every tax law change). The choice is *which third party owns the form mechanics*.

| Option | What it is | Pros | Cons | Fit for J2 |
|--------|-----------|------|------|------------|
| **A. Aiwyn Tax (MCP)** | Tax engine accessible via API/MCP in our environment today | Programmatic prep — drops directly into Atlas workflow. No desktop app. Calls return PDF, jurisdiction list, namespace schema. | Coverage unknown — need to verify business returns (1120-S, 1065), state breadth, e-file capability, pricing. | **High potential if it covers business returns + state + e-file** — this is the cleanest architecture by far. **Needs evaluation before commitment.** |
| **B. ProConnect Tax Online API** (Intuit) | Cloud prep engine, has limited API exposure | Intuit-owned → integrates with QBO data primitives we already know. Full federal + state + e-file. | API is partner-tier; not all functions exposed; per-return pricing $40–80; UI is still Intuit's, not ours. | Medium. Loses some control over UX but eliminates form-mechanics risk entirely. |
| **C. UltraTax / Lacerte / Drake (desktop)** | Industry-standard prep packages | Mature, full coverage, every CPA's known quantity. | **No real API.** Integration = file imports / file exports. Defeats the continuous-loop moat. Desktop license model fights cloud-native architecture. | Low. Falls back to "buy TaxDome and stop" path. |
| **D. TaxDome + Drake (hybrid)** | TaxDome for client portal/workflow, Drake for prep | Fast deploy, well-trodden | Same as C — Drake is the engine, our system becomes a thin wrapper. Limited differentiation. | Low. |
| **E. Native form engine** | Build 1040 + 1120-S + 1065 + states from scratch in Atlas | Total control, total moat | Years of build, perpetual annual maintenance, regulatory risk on form correctness, no e-file path without IRS-approved software certification | **Reject.** |

**Rex's recommendation:** **Evaluate Aiwyn (A) first.** If it covers 1040 + 1120-S + 1065 + relevant states + e-file, that's the architecture. If it's federal/1040-only or no e-file, fall back to **ProConnect API (B)** for the prep engine while we build the surrounding workflow natively in Atlas.

**The evaluation is a 1–2 day task** (Riv can probe the Aiwyn MCP — confirm form coverage, state list, e-file mechanism, pricing per return). It's the gate on every other build decision and should run before Atlas writes a single line of schema for the prep module.

---

## 4. Workflow modules (what the prep side actually does)

Bolts onto SavingsMax's planning engine. Shared client master record, shared entity stack, shared QBO data feed.

### 4.1 Pre-season (Nov–Dec)
- **Tax engagement letter** generated per client (scope, fee, deadlines, e-sign)
- **Document checklist** auto-generated from prior-year return (every form they had last year, plus delta items detected in books)
- **Client portal** request: missing personal-side docs (W-2, 1099, K-1, brokerage 1099-B, mortgage int, etc.)

### 4.2 In-season (Jan–Apr)
- **Auto-draft from books:** P&L → Schedule C / 1120-S / 1065 line items via pre-mapped chart of accounts. Owner W-2 from payroll. Depreciation from fixed asset register. Distributions/draws from balance sheet.
- **Book-to-tax M-1 worktape:** every adjustment shown with source transaction. Reviewer-friendly.
- **Personal-side intake:** OCR + AI extraction on uploaded W-2/1099/K-1/brokerage. Low-confidence fields flagged for human review (this part already specified in Ledger's doc §2.5).
- **Cross-reference engine:** prior-year carryforwards (NOL, capital loss, §179, passive losses, AMT credit) auto-loaded from prior return.
- **Review queue:** every return goes to a 2-stage review. Preparer → reviewer → signer. Three roles even if Jimmie wears all three hats today.
- **E-sign + e-file:** client signs 8879; we transmit; we get acks; we send copies and payment vouchers automatically.

### 4.3 Post-season (May–Dec)
- **Hand the return data BACK to the planning engine** to update next year's baseline.
- **Actual vs. projected variance report** — how good were our projections? Tightens the model over time.
- **Year-round amendment / IRS-notice workflow** (this is real work; clients get CP2000s and we need a place to track them).

### 4.4 Continuous (year-round, the moat)
- **Monthly close → tax projection refresh.** Every Ledger close pushes new actuals; tax engine recalcs nightly. Projection dashboard always current.
- **S-Corp comp drift alerts.** If owner's YTD distribution/W-2 ratio crosses a planned threshold, flag it to Jimmie *while it's still fixable*.
- **Estimated payment auto-adjustment.** Q1/Q2/Q3 vouchers recalculated from actuals, not stale projections.
- **Strategy queue.** Planning items from SavingsMax's strategy library appear as tasks tied to specific deadlines on each client.

---

## 5. Data feeds — what prep needs FROM the books

Most of this Ledger already specified in §2.3 of the parent doc. Delta items for the prep module specifically:

| Data | Cadence | Source | Notes |
|------|---------|--------|-------|
| Trial balance, mapped to tax form lines | Monthly + final | QBO via Coefficient | Chart of accounts must include tax-line mapping (one-time setup per client) |
| Owner W-2 (S-corp), box-by-box | Annual + YTD | Rippling / payroll system | Already inside the Rippling pipeline Riv is building |
| Fixed asset register with current-year additions/dispositions | Annual + as-incurred | QBO + asset detail spreadsheet | This is where §179 / bonus / cost seg elections live |
| Owner distributions vs. compensation (S-corp) | Monthly | QBO equity accounts + payroll | Drives S-corp reasonable comp monitor |
| Loan basis tracking (S-corp shareholder loans, partnership outside basis) | Annual | QBO + manual worktape | Critical for K-1 losses; standalone shops miss this constantly |
| 1099 source data | Annual | Already in Tally's flow | Eliminates a major intake step |
| AP/AR aging detail | Annual at YE | QBO | For cash-basis adjustments if applicable |

**Implication for the books side:** every client's chart of accounts needs a **tax-line mapping** as part of onboarding. This is a Ledger workflow change. Once mapped, prep-from-books is near-automatic. **Without it, you re-do account-to-line classification every January.** Mapping is one-time per client.

---

## 6. Pricing model — needs a rethink

Ledger's doc set SavingsMax planning pricing at **12% of estimated tax savings per strategy**. That model doesn't extend cleanly to return prep, which is a compliance service rather than a value-driven one. Options:

| Model | How it works | Trade-off |
|-------|--------------|-----------|
| **Bundle prep into bookkeeping retainer** | Monthly retainer increases $200–500/mo; prep is "included" | Highest LTV, smoothest revenue. Anchors client to J2 long-term. Compresses standalone-CPA competition. |
| **Flat fee per return** | $800–1,500 for 1040, $1,200–2,500 for 1120-S/1065 | Industry-standard. Easy to quote. |
| **Hybrid** | Bookkeeping retainer covers entity return + owner 1040; complex personal stuff (multi-state, K-1 cascade, RE) billed flat | Most common in the bookkeeping → tax bundle market. Probably right answer. |

**Rex's recommendation:** bundle the entity return + owner 1040 into the bookkeeping retainer (raise the monthly), flat-fee complex add-ons. This makes the "we own the whole stack" pitch real. Defer SavingsMax planning's 12%-of-savings model **for the planning strategies that are above and beyond compliance work** — those are still incremental value, and 12% is still defensible.

This is your call, not mine — but flagging that the prep side needs its own pricing logic.

---

## 7. Schema integration — preview for Atlas

The planning engine schema (Ledger §2) already nailed the heavy lifting (client master, entity stack, financial data, personal data, carryforwards). The prep module adds these tables/extensions:

| Object | What it tracks |
|--------|----------------|
| `tax_engagement` | One per client per tax year. Engagement letter, scope, status (engaged → in-prep → in-review → filed → amended), fee terms, due date. Extends Atlas `projects`. |
| `tax_return` | One per return per engagement. Form type (1040, 1120-S, 1065, state code), filing status, status (draft → reviewed → e-signed → transmitted → accepted → rejected), e-file submission ID, acceptance ack, refund/balance due. |
| `tax_document` | All source docs (W-2, 1099-NEC, 1099-DIV, 1099-B, K-1, brokerage, mortgage int, etc.). OCR extraction fields per type. Confidence scores. Linked to engagement. Extends Atlas media table. |
| `tax_line_mapping` | Chart-of-account-line → tax-form-line. One per client. One-time setup, reused every year. |
| `tax_review_queue` | Two-stage review state machine. Preparer / reviewer / signer. Audit trail. |
| `tax_projection_snapshot` | Time-series projection per client. Lets us show "projection in March vs. October" — proves the continuous-loop value. (Note: this serves BOTH the planning and prep modules — single table.) |
| `irs_authorization` | 2848/8821 per client. Effective dates. CAF tracking. Renewal workflow. |
| `tax_notice` | CP2000s, audit letters, etc. Long-running open-item queue. |

**Existing extensions:**
- `clients` table: add `tax_filing_status`, `state_of_residence`, `dob_taxpayer`, `dob_spouse`, `efin_assigned`, `cpa_handoff` (for clients we don't prep for, just plan).
- `entities` table (per Ledger §2.2): add `tax_year_end`, `entity_election_date` (S-corp), `ein`, `tax_books_method` (cash/accrual).
- `projects` table: tax engagements ride on this; status states extend.

**This pairs with Aiwyn's `tax_namespace_schema` if we go that route — their schema defines what they need; ours defines what we hold. Atlas needs Aiwyn's contract before finalizing.**

---

## 8. Phasing — recommended sequence

Ledger's doc proposed planning-side phasing (Phase 1 federal-only → Phase 4 HNW). For prep, here's the parallel track:

| Phase | Scope | Duration estimate | Gate |
|-------|-------|-------------------|------|
| **0** | Aiwyn evaluation (Riv) + EA path decision (Jimmie) + EFIN application | 2–4 wks | Go/no-go on engine choice; commit to EA path |
| **1** | Books-to-tax mapping for top 5 S-corp clients + entity return prep (1120-S) using chosen engine, internal-only (no client portal yet) | 6–8 wks | First return drafts in Feb 2027 for TY2026 |
| **2** | Add owner 1040s for those 5 clients + client portal + e-sign + e-file | 6–8 wks | First full bundled returns Mar 2027 |
| **3** | Roll out to all clients in book + multi-state + complex K-1 cascades | TY2027 season | Whole book prep-ready by Jan 2028 |
| **4** | Notice/amendment/audit workflow, advanced HNW (8606, F2555, F3520, etc.) | Ongoing | — |

**Bias toward the "full-architecture-with-gate" model** (per your stated preference): build the data model and engine choice end-to-end before Phase 1 ships, so Phase 2/3 don't require schema rewrites. Your supervision cost: ~weekly check-in with Atlas during Phase 0–1 (likely Nov 2026 – Feb 2027), heavier in Phase 1 first-return reviews (Jan–Feb 2027).

---

## 9. What's automated vs. manual (preempting the obvious question)

**Fully automated (one-time setup):**
- Tax-line mapping per client chart of accounts
- EFIN, 2848, engagement letter templates

**Fully automated (recurring):**
- Monthly close → tax projection refresh
- Entity return draft from books (1120-S / 1065 from clean GL)
- Estimated payment recalculation from YTD actuals
- S-corp comp drift detection
- E-file submission + acknowledgment capture
- Carryforward tracking year-over-year

**Manual (recurring, can't be automated):**
- Personal-side doc review (OCR will be 90% — the last 10% is judgment)
- Two-stage review of every return (this is the credential layer — software can't sign for you)
- Client communication on complex items
- IRS notice responses

**Manual (rare):**
- Aiwyn schema updates if they rev the API
- Annual rule-config updates (brackets, contribution limits — Ledger flagged this)

**Tools ruled out (and why):**
- Drake/UltraTax/Lacerte: no API path → moat-destroying
- Native form engine: build cost too high, regulatory risk too high
- TaxDome standalone: it's a workflow shell, not a prep engine — doesn't replace this build

---

## 10. The blocking question

Before Atlas can spec the schema integration, before Riv can evaluate engines, before any commitment of build time — **one question gates everything else**:

> **Are you willing to commit to the EA credential path (3–6 months of exam prep) alongside the build, or do you want to operate the prep module under PTIN-only with a credentialed reviewer (you'd need to hire/contract an EA or CPA to be the "signer of record" on returns)?**

This is the gate because:
- It determines whether the prep module is a J2-internal capability or requires an external credentialed partner in the loop
- It determines the schema for the `tax_review_queue` (single-signer vs. external-signer-handoff)
- It determines the malpractice insurance class
- It determines the realistic timeline to first signed return (your EA exam vs. partner hiring)

Don't answer the other questions (engine choice, pricing model, phasing details) until this one is resolved. They all cascade from it.

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## 11. Next steps (after blocking question is answered)

1. **Riv** — Aiwyn Tax MCP evaluation (form coverage, state list, e-file path, pricing). 1–2 days.
2. **Ledger** — Tax-line mapping template for the QBO chart of accounts. Pilot on Afton Electric.
3. **Atlas** — Schema integration design draft (extends SavingsMax planning schema with §7 of this doc).
4. **Pixel** — SavingsMax brand kit (already flagged in Ledger §9.3) extended to prep deliverables (engagement letter, return cover sheet, e-sign templates).
5. **Nolan** — If Jimmie goes the partner-EA route, scope the hire.

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**End of addendum.**
**Parent doc remains canonical for the planning side. This doc adds the prep module on top.**