Managing the Compression of Tax-Season Work

by Westhelle, Theodore Jr, CPA, Mazars USA LLP – November 20, 2018
Managing the Compression of Tax-Season Work

Tax season can be a very trying and stressful time for accounting professionals. Most firms complete a high percentage of their work in a short timeframe. Employers are required to furnish their employees with form W-2 by Jan. 31, but other required tax information such as Form 1099Bs and K-1s are received later. That results in roughly an eight-week period to file most individual tax returns. The Cumulative 2017 Filing Season Information for Tax Returns Processed by the IRS showed that approximately 150.3 million tax year 2016 personal tax returns were processed by Nov. 23, 2017. And, as of May 17, 2017, 134.6 million personal tax returns had already been processed. It’s safe to assume that most of the returns that were processed as of this date were not extended, and thus prepared by the April filing deadline. That would equate to roughly 90 percent of all individual tax returns being filed in a two-month period.

Most tax returns that get extended are more complex and require a lot more time to be prepared. But the bottom line is that an incredible amount of work is produced in a short period.

Business tax returns are also prepared during this work-load compression period. Calendar year S corporations and part­nerships are due by March 15. Calendar C corporations are due by April 15.

There are many ways a firm can prepare in order to reduce stress and manage the work compression of a busy tax season. These include the following:

  • Evaluate your clients. Is there a business purpose to continue to service clients that produce low realization? Train new staff early.
  • Train new staff early
  • Roll over files and update software.
    • Utilize technology, such as scanners, workflow software and client portals, to help you work more efficiently.
    • Send out organizers or information requests early.
    • Identify the appropriate staff or resource for each client before the work is available. This will enable the firm to maximize its resources. Don’t assign staff to an engagement just because he or she did it last year.
  • Set expectations with staff.
    • Identify and explain procedures. 
    • Communicate the number of hours they are expected to work (if that is a firm policy). 
    • Assign clients to staff so they can familiarize themselves. 
    • Communicate the urgency of turning work around as quickly as possible. Explain to them that a few extra hours worked early in the season could ease the burden at crunch time. 
  • Frontload any work possible. 
    • E-file all zero extensions as soon as software is available or government permits. If you have partnerships you know are going on extension, there is no need to wait until close to the due date.     
    • File extensions for corporations that you know will be  in a loss position. Calculate any minimum state taxes and file these as well. Anything that can be done early will help. 
    • Request partial information early. Even if a client does not have their books closed in early January, there is a pretty good chance that they could provide a schedule of any fixed asset additions that were made during the year. Request the information early and get the assets entered into the tax software. 
  • Set expectations with clients. 
    • Establish a reasonable timeline of when you expect your clients to provide their information and communicate it to them, preferably in writing. 
    • Communicate any cut-off date the firm might have. For example, the firm cannot guarantee the completion of any tax return for which the information is not provided by April 5 (choose whatever date you deem appropriate). This will motivate at least some clients to provide it earlier.
    • Start pushing clients who have a reputation for being last minute early in the process. Put the importance of hitting these deadlines in their head. Remember, a squeaky wheel gets the oil. 
    • If appropriate, offer a discount for work that can be done off-season.   
  • Consider alternative resources, such as hiring per-diem staff or outsourcing to other firms or offshore services.

Richard Westhelle

Theodore Westhelle, Jr., CPA, is a tax director at Mazars USA LLP in Edison, NJ. He is a member of the NJCPA.

This article appeared in the November/December 2018 issue of New Jersey CPA magazine. Read the full issue.