Art of Accounting: Tax return difficulty levels and free checklists
There is no question there are different levels of complexity for tax returns.
It is also a given that many tax returns in accounting and tax preparation firms are prepared by lower-level staff. The returns are reviewed by higher-level people, but the preparation is done at lower levels. I have always followed this procedure, and here are some reasons why it has worked well for my partners and me:
• We trained our new staff carefully and deliberately and used uniform processes so that everyone followed the same procedures.
• We started the beginners with simple returns and gradually worked our way up to more difficult ones. Each time we had three of each type of return lined up so at the end of each training session they knew what they were doing.
• Usually at the end of a full month of solid tax season work, they were able to prepare almost every medium-difficulty type of return and about 85 percent of the most difficult returns. Managers and supervisors completed the balance of the return or showed the preparer how to get the return finished. All returns went through our quality control and review process in the standard manner. These returns weren’t given special treatment—and it wasn’t needed
• All the training was done using an OJT (on the job training) system. Except for an initial indoctrination in our system and processes, no extra time was spent on the training. Afterwards, almost all time spent was productive time
• In my smaller firm it was not too difficult to categorize the returns. Today, at Withum, a Top 30 firm, we have a classification system where we assign returns as A through E, with E being the most difficult returns. This is very helpful in assigning the returns.
• Using the classification system makes it easy to assign the returns, which are done by an administrative person through our workflow software when the return is ready to be worked on by a preparer.
• For starters, the admin person scans the client information into our smart scanner. When a data-populated preparation file is returned, it is assigned based on the classification.
• The training is done before the assignments are handled through this system.
• Occasionally a return is assigned incorrectly. When this occurs, it is up to the preparer to recognize this and either have it reassigned or to work through it with help from a supervisor. Helping doesn’t mean doing it, but rather showing how to get it done.
• Routinely assigning a return that is too difficult is a guarantee of failure. With proper management that doesn’t usually occur.
• When it is necessary to assign a difficult return to someone, it is helpful they have the prior year’s return or, if not comparable, a similar return to use as a guide. The preparer should understand this, and if one hasn’t been given to them, they need the good sense to ask for one. With proper supervision, this will be done routinely. Another thing preparers of difficult returns need to understand is that the IRS or state instruction booklets are excellent guides they should refer to when they are preparing a new type of return for the first time.
Proper and deliberate training, supervision and oversight add up to effective management. You do not have to follow my system, but you need a system and it should be managed. I know the above is a good plan because it is works for me and us at Withum.
Tax Season Checklists Available
Updates of my tax season checklists have become a tradition, and they have now expanded to 66 checklists, including some other practice aids. I hope you enjoy using them and they help make tax season easier for you. Click here for a Word file to download my 66 tax season checklists. Also, if you have any practice management questions, do not hesitate to reach out to me at email@example.com.
Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 964-9329 or firstname.lastname@example.org.