Art of Accounting: Don't have have another 'worst tax season ever'

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I am still getting calls from colleagues who are complaining about their “worst tax season ever.” I cannot help them, but can offer some suggestions on how to decrease next year’s pressure so they won’t need to make a call next year about their new worst tax season ever. (Two of my recent columns about this topic appeared on May 13 and May 20, 2019.)

The gist of the “complaints” was not about the work as much as the human element:

  • The continuous calls from clients; interruptions from staff;
  • A steady flow of corrected 1099s;
  • Piecemeal submission of tax information from clients;
  • Having to apply the new tax rules (particularly 199A and 163j);
  • Added conversations with clients about the effect of the Tax Cuts and Jobs Act;
  • Careless errors by staff;
  • Inattention because of a “rush, rush, get-it-out” mindset; and,
  • A general, unsettled, out-of-control feeling throughout tax season.

Each of these reasons has rational and logical explanations, but the end result was a constant, unrelenting, out-of-control feeling .

Here are some suggestions to consider and get started on now to help you next year:

  • Don’t load yourself up with compliance work if you are able to hire people to do it. I did this when I was managing my practice. I was always busy working, but on special projects and with meetings and calls with clients, trying to avoid fires, and making sure staff were following our procedures and doing what they were supposed to do. Fortunately, my partners and I supported each other, and we were always on the same page. On some level I spent time managing the practice and did not have a gun over my head from the deadline of having to prepare tax returns or financial statements.
  • In connection with the previous item, if you eliminated the tax preparation and possibly the review, I believe the pressure will abate; however, you would still be doing the final topside review before signing the return. My colleagues whom I told this to thought I was crazy — they insisted they needed to do the work to get through tax season. I believe effective, deliberate and focused oversight by at least one owner would create efficiencies, a better workflow and fewer errors. The absence of a boss “pushing the pencil,” entering the data or whatever the new language is nowadays, would not diminish productivity. By the way, this is called “management.” I know it works because we did it that way.
  • Hire extra staff for tax season, either full-time or part-timers — whatever you can get. Any experienced person can get 85 to 90 percent of a return done without assistance. You or your partners can provide the added 10 to 15 percent until they learn how to bring the work up to 100 percent on many of the returns.
  • Hire students, i.e., interns, to work part-time during tax season. I know that minimal effective on-the-job training can get them up and running pretty quickly.
  • Use smart scanning software to populate the tax preparation software, which will reduce staff time. Use the interns to check the output rather than for data entry.
  • Consider reducing overtime by limiting total hours on a weekday to 12 hours, and six hours on one weekend day. Note, that is a 66-hour maximum work week — a really high work week but much less, i.e., 58 hours, when only three nights are permitted to be worked. I think these are still too many hours to have the staff work, but I am suggesting a plan to reduce stress, and not to turn your practice into an ideal operation. I also suggest ongoing payment for overtime and not a deferred bonus, to create some added motivation.
  • I also suggest a thorough review of your clients’ returns to determine what work might be performed in November and December rather than during tax season. An example is to enter extensive stock transactions through October 31, review QuickBooks to see if the transactions have been entered properly and the bank reconciliations have been done, or fixed asset acquisitions have been scheduled properly. The same goes for tax-reporting situations that arise during the year that can be done now, as opposed to during tax season. This requires having contact with your clients to find out what is going on in their lives. Some examples are the sale of a vacation home or a business, employer stock options that have been exercised, or an inheritance received that requires a Section 754 step up.

Fixes to tax season problems need to start now with planning, better training of staff, setting up better workflow procedures and other necessary actions. If not, then it is highly likely the problems of last tax season will be repeated.

Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions.

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Tax season Tax practice Recruiting Ed Mendlowitz