Only 10% of the tax preparation process involves human review. The remaining 90% is consumed by tedious tasks, at the cost of customers and CPAs. TaxDrop, the first all-digital tax prep service, tackles the issue with automation. Founder Alice Cheng sheds light on the industry and the digital direction it’s heading.
What led you to build TaxDrop?
TaxDrop weaves together my experience in a local CPA firm and as a Deloitte international tax consultant. The two are polar opposites, but each offers unique strengths to the accounting world. Where your local CPA firm feels personal and individual consumer-driven, Deloitte is a robust machine that cranks out hundreds of thousands of returns a year.
I’ve always had the ambition to start my own tax prep firm, and I knew if I was going to, it had to offer the absolute best services possible, which meant not letting the customer worry about taxes at all. As a CPA and a millennial, I realized had the unique opportunity to create a modern, disruptive service that blended the best parts of individual consumer tax preparation with the best parts of Deloitte, one of the top four international consulting firms. My focus with TaxDrop is to offer a tax-prep solution that delivers efficiency without sacrificing the personal touch of your local tax preparer.
Financial literacy, particularly among millennials, is receiving growing attention. What are your thoughts on the issue?
Millennials hold the greatest ever amount of student debt. As a result, they’re not saving as much as they could. I think it boils down to a lack of urgency and a steep learning curve. If you’re a student with student debt or loans, your focus is more about getting through the next year or ten years—not about planning for the next 40.
Finance also seems daunting to people with almost no interest in the topic. Their attitude is more like, “I trust you, just take my stuff and do what you need to do.”
To address the issue, I’d love to provide millennial financial planning services. Something that would explain in plain English how users are doing with their savings, and where we would expect them to be based on others in their demographic.
What is something you know to be true that barely anyone in the world realizes?
I am really set on the fact that the future of transportation will be air travel. When I hear about tunnels and self-driving cars, Henry Ford’s sentiment of “if I asked people what they wanted, they would have said faster horses,” comes to mind. Land-travel is limited to a 2D plane, giving rise to traffic and congestion.
With air travel, you wouldn’t be exposed to rush hour or traffic, just because there’s so much air space to work with. Instead, you’d be able to cross the distance from New York to California in such a short period of time.
Building a company is extremely demanding. How do you decompress?
Exercising! I love the runner’s high, and it’s a great way to clear your mind. I already have a few half-marathons under my belt and am planning on doing a triathlon next summer.
Through Republic, I’ve connected with people I’ve never met from Chicago, California, and even outside of the US. It’s a great feeling to know people are totally onboard with what we’re doing.
What excites you about equity crowdfunding?
Equity crowdfunding allows people to build a relationship with your business because they are behind your vision and expect it to be successful.
I get so excited watching the total raised go up on Republic, even when people invest the minimum ($100). Through Republic, I’ve connected with people I’ve never met from Chicago, California, and even outside of the US. It’s a great feeling to know people are totally onboard with what we’re doing.
Two apps you can’t live without?
Slack - It’s so useful for staying connected.
Google translate - My family speaks Mandarin, and I am personally a huge linguaphile—I love foreign languages. I would actually love to incorporate multi-languages into TaxDrop one day, allowing the user to select their preferred language on the app and connect with a CPA that speaks that language. I feel that this is really necessary with the diversity found in the US.
With a touch of automation and artificial intelligence, we can program machines do the data entry and let human experts review.
As a CPA, how do you see the accounting landscape changing in the next five years?
Industries with monotonous tasks are embracing digital solutions. Traditional accounting, for example, involves a lot of manual data entry and plugging numbers one at a time. Automation has a lot of potential in accounting, largely because the forms and calculations are so standardized. With a touch of automation and artificial intelligence, we can program machines do the data entry and let human experts review.
If you were an investor, how would you look at TaxDrop as an opportunity?
It’s a huge opportunity because we’re the first to market this real idea of making tax prep easier. Two pain points of tax preparation are traveling to see an expert and the tedious finding and processing of all of your financial documents from that year. Our current product cuts the need to travel by allowing users to snap photos of tax documents from the convenience of their home.
We also emphasize automation, fast forwarding through most of the tax preparation process. For perspective, only 10% of the tax assembly line is review time. You can automate the residual 90% that goes into monotonous tasks, cutting costs and maximizing the CPA’s use of time.
Automation also reveals new features, like seeing your income and expenses in real time. This benefits both customers and CPAs. A customer can see his financial details in real time, making his quarterly withholding even lower and leaving less for an excess refund in the spring. Also great for the CPA, who will have your income and tax expenses without needing to chase the customer for it.
There’s also scope for TaxDrop to do much more. After nailing tax preparation, we can then tackle financial planning services.
Are there any professional services that you really love?
I love DocuSign for contracts. Accounting is such a traditionally paper heavy industry. I’ve seen pounds of paper printed, just to sign one sheet.
Accompany. It’s like Facebook meets LinkedIn. I find it useful for staying on top of what companies of interest are up to and what events people in your network will be speaking at. Accompany is also great for preparing for important events, for example meeting with a venture capitalist.
Something you’d like investors to know?
Taxes are something that affect everyone in the world. Not only that, but pain points are more or less the same. A smarter approach to tax preparation, and accounting in general, has so much potential for international adoption.