Art of Accounting: Trifecta of tax season compression reduction

We have a short window during the next month where we can reduce tax season compression, have better served and happier clients, and make more money. I call this the “trifecta of tax season compression reduction.”

Many of our clients and particularly our larger clients probably engaged in out of the ordinary activities during this year that would need to be reported on their tax returns. A simple way to handle this is to find out about it now, before the end of the year, and work on it before you get overloaded with tax season work. Doing this accomplishes the following:

1. Reduce tax season workload: Work that you would be performing during the busiest periods of tax season would be shifted to the end of this year when you might not be as busy or which can be scheduled to work on early in January before tax season gears up. You will have to do the work anyway, and doing it now would relieve some of the tax season pressure. I am quite familiar with the argument that you are always busy at the end of the year. That is so, but you cannot be as busy and have as much pressure as you will during tax season. 
2. Better served and happier clients: Working on special situations now will be with an absence of the time crunch many experience during tax season and will be in a calmer atmosphere. You will also be able to discuss the issues more thoroughly with the client and uncover added deductions that would save tax. Even without any tax-saving revelations, you can project any added tax and give the client a schedule of the tax due and payment dates. If nothing else, this would eliminate a surprise result, which always causes consternation with the client. Complicated tax aspects can be reviewed now, so another brain is looking at the transaction, also in this non-rushed period.
3. Generates more revenue: Additional tax return reporting and unusual transactions generally result in extra fees. Occasionally this type of work is done before notifying the client of the costs. Further, when done during tax season, some higher-level staff might need to be conscripted to work on those transactions, disrupting schedules. When a special transaction is looked at, in the calm away from tax season, a discussion about the extra fees is easier to have and provides the client with the empowerment to accept or reject the added service. Very few reject the service since it is necessary, but having the right to reject is a powerful tool to give the client, and in my experience, usually leads to acceptance of the added fees. Further, since we are not doing this in our most hectic period we can take more time to have the client provide what we need and perhaps go back in time to recreate some of the original transactions, which could result in lowering the tax bill. Also, when the fees are decoupled from the tax preparation, there is a pretty clear understanding by the client that next year’s fee would not be affected. Doing the work during tax season and adding the charges to the preparation fee (and not explaining it clearly) can create a misconception that you bumped up the preparation fee, possibly placing your “regular” fees out of the range of the client. Additionally, I usually have found that my fees for this added work are greater than if it were done during tax season and billed with the return. Human nature steps in and plays a part.

There are many types of transactions that can be worked on now. Your job is to contact your clients and find out what has transpired so you can get it done now and before the season starts. Here’s a link to a previous column that provided about 25 types of transactions that could be worked on before tax season.

Start now with my trifecta of tax season compression reduction and make your next tax season less arduous. This trifecta works.

Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions or about engagements you might not be able to perform.