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Tax & AccountingApril 23, 2020

2020 Tax Season in Data: 04/01/2020

It is an interesting time to be an accountant, especially for those of you who prepare, review, or file tax returns. Much like the adage, “may you live in interesting times,” we certainly do, and with it brings new challenges.

With (most) federal tax deadlines shifting to July, many states following suit, and the continued uncertainty brought on by COVID-19, there is a heightened awareness of the pace of returns being processed.

The data and graphs discussed below are the results of millions of unique tasks processed through the XCMworkflow system annually. We leverage the resulting data points to obtain insight into the pace of filing seasons. Our customers, who receive these types of analytics during the tax filing season, have told us that one of the more significant benefits they receive from the data is when they compare their firm against the pace of the national average or similar-sized firms. 

Utilizing XCManalytics as a Service, I have compiled this years’ data for 1040, 1065, and 1120-C returns, benchmarked against 2019 returns to provide the tax community with insights into the pace of the 2020 tax season. I hope that this information helps you make data-driven decisions. 

Individual Tax Returns (1040)

The national deadline has (mostly) shifted to July, with most state deadlines continuing to follow suit (Virginia, Idaho, and Mississippi are the three exceptions). The increasing gap between year-over-year national averages is not surprising, and is, in fact, a logical outcome. Both firms and their clients are taking advantage of extended tax deadlines.

Two positives in the data are that the percentage of returns not started for 2020 has dropped by nearly 5 points (from 49.1% on 03/24) and that the percentage of returns has increased by 4.2% since 03/24. In progress returns, however, have dropped 3.8% since 03/24.

It remains to be seen if social and physical distancing / working remote affects productivity and completion. I believe that as firms continue to work remotely, we will gain additional insights into how the national leaders are optimizing business processes and harnessing the collective power of automation to serve their customers.

Partnership Returns (1065)

Partnership return data is, much like the individual return data, showing a slight drop in productivity year-over-year. While not at the same levels as individual returns, the trend continues. There is an increasing backlog of returns not yet started, and a slight dip year-over-year in returns actively being prepared or reviewed.

Are you a firm with similar activity? I recommend organizing and completing as much pre-preparation work as possible now. Doing this work in advance will help you shorten the preparation cycle, create an environment for optimal productivity during the preparation cycle, and build a quality return to review.

Absent the opportunity for advance preparation, I recommend your firm perform a forecasting exercise. Utilize prior years’ activity to help you line up resources and ensure you have capacity when work comes in the door. Despite an extended tax season, prior years’ activity can still help to align your targets with some extrapolation and modeling.

Pivoting to work already completed, I am encouraged to see that completion rates are within two percentage points of last year’s data.

Corporation Returns (1120 C)

Rounding out our data, we take a look at the XCM national filing pace for 1120 C Corporations.

With the world acclimating to new work from home realities, and the adjustment of filing dates, it is of no surprise to see this years’ pace falling behind last year in each process segment. The gap between returns not started in 2019 and 2020 has increased from 4.7% for the period ending 03/24 to 7.8% for the period ending 04/01.

Concluding Thoughts

We are all becoming accustomed to new work situations, and each of us is impacted differently. I anticipate the continued implementation of virtual collaboration and productivity tools to assist firms and employees in maximizing work from home productivity. Existing processes and workflows will need to be modified to take the unique challenges of a work-from-home environment into account. As an example, protecting confidential client information and maintaining VPN access. As newly created or modified processes become optimized, and routines are established, I anticipate the pace of filings will pick up.

Click through to read the 04/20 update, and stay safe, stay healthy, and stay productive.

Mark McAndrew
Mark McAndrew, Author at Tax & Accounting

As the Director of Project Management for Firm Management (FM) at Wolters Kluwer, Mark focuses on the vision and strategy of all FM products and delivering customer and shareholder outcomes within the FM solutions set. Mark has extensive experience within both the Fortune 1000 and large public accounting firm spaces. He is a frequent speaker on business process management and workflow advisory consulting, tax and accounting outsourcing, and productivity enablement software deployments.

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