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Automate Tax Form Data Extraction in 5 Easy Steps

March 19th, 2024

A Smartsheet report found that over 40% of workers spend at least a quarter of their workweek manually extracting data. Tax specialists in many organizations spend hours or even days sorting through piles of paper or PDF documents, looking for relevant information, and entering it into spreadsheets or databases.

That’s a lot of time and money wasted on a tedious and error-prone process. Fortunately, there is a better way to handle tax form data extraction. With Astera ReportMiner, you can automate the entire process and save yourself time, money, and hassle.

Why Is Tax Form Data Extraction Important?

Tax form data extraction, especially from documents like W-2, 1099, and 1098, is crucial for individuals, businesses, tax professionals, lenders, financial institutions, researchers, and analysts for various reasons:

  • Accurate Tax Filing: Automating data extraction ensures accurate and timely tax return filing for individuals and businesses, reducing the risk of penalties, interest, and audits from the IRS.
  • Enhanced Services: Tax professionals and accountants can provide better services to clients with accurately extracted data, like tax planning, compliance, optimization, and resolution.
  • Risk Reduction: Lenders and financial institutions can accurately verify borrower income and creditworthiness, reducing the risk of default and fraud.
  • Insightful Analysis: Researchers and analysts can study economic and social trends based on tax data like income distribution, tax burden, incentives, and evasion.

Automating tax form data extraction is essential as it:

  • Saves Time & Resources: Reducing manual effort and errors in data entry while increasing processing speed.
  • Improves Accuracy & Consistency: Standardizing data extraction models minimizes variations in data quality.
  • Enhances Compliance & Security: Ensuring extracted data meets tax regulations and is securely stored.

How Astera Transforms Tax Form Data Extraction

Astera ReportMiner is a powerful unstructured data extraction solution that automates and streamlines tax form data extraction. Astera ReportMiner captures and converts unstructured data into a structured format. It leverages advanced OCR and AI capabilities to extract data from any document, including scanned PDFs, digital PDFs, and other unstructured sources.

With Astera ReportMiner, you can:

  • Create and reuse extraction templates: You can easily create and reuse extraction templates for different tax forms using the intuitive drag-and-drop interface. You can create extraction templates for common tax formats, such as W-2, 1099, 1040, and more. They can build these templates using ReportMiner, customize them based on their specific needs and reuse on several docs with the same format.  You can also define the rules and logic for data extraction, such as data types, formats, validations, and transformations.
  • Extract data from multiple sources: You can extract data from multiple sources, such as scanned PDFs, digital PDFs, images, and other unstructured documents. With high accuracy and speed, you can use the built-in OCR engine to recognize and extract data from scanned or image-based documents. You can create extraction templates with a few clicks, so they no longer have to provide patterns and create data regions and fields manually. This reduces the manual work in creating an extraction template, especially helpful when documents have complex or extensive layouts.
  • Integrate and export data to multiple destinations: You can integrate and export the extracted data to various destinations, such as databases, files, BI tools, or other applications. You can use the built-in connectors to connect to popular data sources and destinations, such as SQL Server, Oracle, Excel, CSV, XML, JSON, and Power BI and Tableau APIs. You can also use the REST API connector to integrate with other custom or third-party applications.

Astera ReportMiner

Solution Demonstration: How Astera Automates End-to-End Tax Form Data Extraction

Step 1: Creating the Project

The first step is to create an Astera project. For this use case, you don’t need to add source file to the project either.  With Astera, you can process any unstructured file, such as scanned PDFs, digital PDFs, forms, .TXT, .CSV and other unstructured documents. For this example, you will use a digital PDF file that contains W-2 forms.

tax form data extraction

Figure 1

Step 2: Email Handling Automation

To access W2 tax form data, you must monitor incoming emails for W2 tax form attachments, move them to a designated folder, and mark them as read. You can automate this by building and scheduling a data pipeline.

This will ensure timely processing of W2 forms upon receipt, streamline data extraction workflow, facilitate centralized attachment management, and enhance email management. To do this, you will need to:

  • Configure an email source in the dataflow artifact of Astera ReportMiner, where you configure the email connection.
  • Dataflow to download attachments in a local folder from Unread emails with “Forms” in the Subject (this dataflow is scheduled to run continuously):
tax form data extraction

Figure 2

  • Set the filter criteria to select only the emails with ‘Forms’ in the subject line.
tax form data extraction

Figure 3

  • In the Email Source object, enable the option to download attachments and specify the folder path where you want to store the downloaded attachments. Email attachments automatically appear in the chosen folder:
tax form data extraction

Figure 4

  • The Excel destination in the dataflow shown in Figure 2 stores paths for all downloaded attachments:
tax form data extraction

Figure 5

Step 3: Building Report Model for the Tax Form

The next step is to build a report model for the W2 tax form so that you can define the data fields, data types, extraction rules. This will enable precise extraction of W2 from data fields, enhancing the quality and reliability of extracted information. To do this, you will need to:

  • Add a new report model to the project. You can add a sample W2 tax form file as the report layout and adjust the page settings and margins as needed.
  • Typically, users must specify the regions they want to extract data from and the data fields within the regions. However, Astera’s advanced AI-powered extraction engine allows you to create W2 extraction template with a single click:
tax form data extraction

Figure 6

  • When you click Build using AI on the previous screen, the following appears:
tax form data extraction

Figure 7

  • After the above processing ends, we have the AI built report model ready:
tax form data extraction

Figure 8

Step 4: Data Pipeline for Processing a Single Tax Form

The next step is to create a data pipeline for processing a single W2 tax form to extract data from W2 tax form PDFs, standardize numeric fields, validate tax information, generate validity fields, and transfer processed data to a destination database. This will ensure consistent and accurate extraction of critical information from W2 forms, enhance data consistency and readability, ensure data accuracy and compliance, facilitate W2 tax form status monitoring and error identification, and enable centralized storage of extracted W2 data. To do this, you will need to:

  • Create a new dataflow in Astera and add the report model you created in the previous step as the source object.
  • Add a transformation object, such as DataCleanse to clean the data, such as removing characters like $, unwanted whitespaces, replace null numerics with zeros etc.
tax form data extraction

Figure 9

  • Add a validation object and apply business rules to validate tax information, such as checking for missing values, matching with reference data, validating tax rates, etc.
tax form data extraction

Figure 10

  • Add a new field to the tax record indicating the validity status of each W2 tax form, such as valid, invalid, or pending, based on the validation results.
tax form data extraction

Figure 11

  • Add a destination object, such as a database table or a flat file, and use it to transfer the processed data to a destination database for secure storage and retrieval. The following is a preview of the data loaded into the db when a single W2 tax form is processed:
tax form data extraction

Figure 12

Step 5: Workflow Automation

The final step is to automate the entire data extraction workflow so that you can trigger processing of W2 tax form files each whenever a new file appears in the email attachment folder you have prepared. This will automate attachment retrieval, ensure a continuous data flow for processing, facilitate easy access to processed attachments, streamline processing by automating file handling, ensure efficient file management, and enable real-time database updates. To do this, you will need to:

  • Create a new workflow in Astera and add  ContextInfo. ContextInfo takes context information of the scheduled job runtime. Here it will get the filepath that will trigger this flow.
  • Add a dataflow task and use it to execute the dataflow you created in the third step to process a single W2 tax form.
  • Add a file system task and use it to delete the processed W2 tax form file from the attachments folder after the dataflow execution.
tax form data extraction

Figure 13

  • The workflow triggers the processing of W2 tax forms as your team receives them in the email attachments folder. Upon completion, the workflow will automatically store records from each email attachment in the destination database:
tax form data extraction

Figure 14

  • Each time your workflow receives a new W2 form attachment via email, it goes into processing (seen by the change in name).
tax form data extraction

Figure 15

  • After a W2 tax form is processed, it will be deleted from the folder, making sure only fresh files appearing in the folder are processed:
tax form data extraction

Figure 16

  • Schedule the workflow to run on file drop trigger in the attachment folder.

Automation’s Impact on Tax Form Data Extraction

  • Reduce tax form data extraction time: Automated tax form data extraction allows you to reduce the data extraction time from hours to minutes by automating and streamlining the process. You can process over 100,000 tax forms in a fraction of the time and meet the deadlines and regulations for tax filing and reporting. With Astera, your team can reduce time spent on data extraction by up to 80%.
  • Improve data quality and accuracy: Automated tax data form extraction allows you to improve the data quality and accuracy by 90%, using built-in data cleansing and validation features. You can ensure the completeness and correctness of the extracted data and avoid any errors or penalties.
  • Save costs and resources: Automated tax data form extraction allows you to save costs by eliminating the need for manual data entry or complex and expensive software. As a result, your team can reduce labor and operational costs and increase the productivity and efficiency of the staff.

With automated tax form extraction, you can extract data from tax forms quickly, easily, and accurately, leveraging data for reporting, analysis, or compliance. Your company can acheive improved customer satisfaction and retention, giving a competitive edge in the market.

Astera ReportMiner is a powerful data extraction solution that handles any tax form and unstructured data source. Whether you need to extract data from W-2, 1099, 1040, or any other tax form, Astera ReportMiner can do it in minutes. No coding or scripting is required. Just point and click. Imagine the hours you could save and the errors you could avoid with this automation.

If you are interested in trying Astera ReportMiner for yourself, you can start a free 14-day trial today or schedule a custom demo with our experts and get a personalized walkthrough of Astera ReportMiner’s features and capabilities. Don’t miss this opportunity to take your data extraction to the next level with Astera ReportMiner.

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