You may have heard the joke, “Last year, I joined a support group for procrastinators. We haven’t met yet.” It’s a funny joke, but tax procrastinators help make tax season a busy season – a very busy season.
While there is no denying tax procrastination affects every tax professional, what are the real solutions? With 1040 taxes already congested into one crowded date of April 15 (April 18 this year) for individuals, and March 15 for S corporations and partnerships, any help from clients providing data sooner than a few days before the deadline is welcome news.
The three-pronged attack to prevent tax procrastination begins with educating clients, providing simplified processes for them, and avoiding any method that slows down the process. Ironically, some methods purported to automate and improve the process actually frustrate and prevent a client from providing the necessary information to complete the tax filing process.
Education begins by reminding clients that a delay in filing taxes is accompanied by a delayed refund and, possibly, the loss of deductions. Clients anticipating refunds need to beat the April rush. Unless a client chooses to file an amended return, extending until October 15 circumvents optimal tax planning. Amending is not often practical because it extends the time tax returns remain open for an audit and also increases the cost to the client.
Filing early also reduces the chances for identity theft. Approximately 110 million taxpayers will file returns for refunds from the IRS. At the same time, about 1 million filers might have their money claimed by a fraudulent tax return filed by an identity thief. In 2013, bogus returns looted $5.8 billion from innocent taxpayers, who then had to fight to prove the tax refund belonged to them. The U.S. Department of Treasury says it takes more than nine months (on average) to correct such a situation.
Not all professional tax preparation software has a tool specifically for obtaining client information before April 15. Some software uses a workflow database to track returning customers. This tool shows the date the client filed the prior year’s tax return, contact numbers and email address, and features the ability to print mailing labels for a reminder letter. An assortment of tools within practice management software attempts to manage what is, for many, an unsolvable problem. There are schedulers used to carry forward appointments and send appointment reminders by letter or email. In addition, there are tax status management tools used to report whether the tax file is complete or awaiting information from a client.
Digital tax workflow with eSignature may help get signed engagement letters back faster – so tax professionals can begin their work sooner. Web-based organizers minimize client data entry with more efficient collection of client source documents. The information collected on the web, or scanned in, can be automated to flow into the tax return and auto send reminders for the data needed to complete tax returns.
Another timesaver is to establish a web-based vault and portal. A client may access documents, as needed, during tax season or any time throughout the year for non-tax activities, such as applying for a loan. A client’s loved ones may even access documents in the event the client is incapacitated.
Avoiding Frustrating Methods
Tax professionals remain frustrated. One professional I talked with equated the situation to raising children.
“Finding the right carrot or stick is a moving target,” says Walter F. Dudley, EA. “Wiser clients understand the advantage and try scheduling early. Sometimes, the message gets across when we phrase is, ‘just how fresh would you like me to be when I work on your return?’ That same thinking also applies to how late in the tax season you bring in your tax documents.”
A useful suggestion that will help for years to come is to schedule a “Get Organized” meeting between your client and a para-professional staff member of the firm. Use a portable scanner during this meeting to scan and index important tax documents.
Editor’s Note: Sometimes, tax professionals have to give bad news to their clients. Here’s an article with tips you can use now, and throughout the year.