Tax Data Exchange Ecosystem

The term Tax Data Exchange is used to describe an ecosystem of tax data communication.
It describes both what is and what should be.

Ecosystem Participants

Ecosystem Communication

Paper Tax Document Mailing

WHAT IS

Tax document issuers mail required tax documents to taxpayers.

Taxpayers do one of the following:

  • Forward the paper tax document to their professional tax preparer
  • Manually enter tax document data into tax software
  • Scan the document with scanner or smartphone app, upload image to tax software or tax professional website for OCR (optical character recognition) processing

WHAT SHOULD BE

Tax document issuers mail tax documents with QR code to taxpayers.

Taxpayers scan the QR code with smartphone app, uploads JSON to tax software or tax professional website for JSON parsing

WHY?

QR code scanning and JSON parsing is far more reliable and simpler to implement than OCR processing.

PDF File Download

WHAT IS

Tax document issuers make tax document PDF files available for download from a website.

Taxpayers do one of the following:

  • Sign in to the website, download the PDF file, print to paper, and forward to their professional tax preparer
  • Manually enter tax document data into tax software
  • Upload PDF file to tax software or tax professional website for PDF parsing

WHAT SHOULD BE

Tax document issuers make Intelligent Tax Document™ files available for download from a website.

Taxpayers upload Intelligent Tax Document files to tax software or tax professional website for JSON extraction and parsing.

WHY?

JSON extraction and parsing is more reliable and much simpler to implement than PDF parsing.

Other File Download

WHAT IS

In addition to providing tax document PDF files, some issuers provide data files in Comma Separated Value (CSV) format or Tax Exchange Format (TXF).

If their tax software supports import of these data formats, taxpayer uploads these files into the software.

WHAT SHOULD BE

Issuers should provide data files in an industry-standard format such as FDX JSON.

Tax software apps should support import of industry-standards FDX JSON files.

WHY?

Few programs support import of proprietary CSV files. Support for TXF import has dwindled and the TXF format is no longer maintained.

Application Program Interfaces (API)

WHAT IS

Some tax document issuers sponsor an API server and interface with a limited number of tax software applications.

These tax document issuers use the older Open Financial Exchange (OFX) technology.

Some issuers have taxpayers enter their account credentials into tax software in order to retrieve tax document data.

WHAT SHOULD BE

Tax document issuers who sponsor an API server should interface with the majority of tax software applications.

These tax document issuers should use the newer Financial Data Exchange (FDX) technology.

Taxpayers should not have to enter their account credentials into tax software in order to retrieve tax document data.

WHY?

Competition in the tax prep industry should be fostered to give taxpayers many tax prep options.

The newer Financial Data Exchange (FDX) technology is more secure as it uses either OAuth2 technology or document-specific passwords.

The financial Data Exchange (FDX) specification supports import of over 50 tax documents.

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