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Tax & AccountingJuly 09, 2020

2020 Tax Season in Data: 06/30/2020

“Be not afraid of growing slowly; be afraid of standing still.” – Chinese Proverb

I wonder how many times today you’ve read about making progress, moving forward, keeping your eye on the prize, or any number of motivational quotes that are intended to inspire you to take action. Personally, I can count at least 5, thanks for reading.

Welcome back to the sixth installment of our tax season in data (for the period ending 06/30/20). At this point in our extended tax season, the trends are pretty clear. Individual returns continue to show a rather significant filing gap, partnership returns are continuing to maintain their pace, and corporate returns are slowly closing their filing gap. Meanwhile, we’re all reading about how to maintain momentum and adapt to change. I hope this straightforward data analysis provides you with a mental break. And as always, I hope that this information helps you make data-driven decisions.

Our Data Source

Before we start, I want to share what data drives the Tax Season in Data. These reports 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, 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.

Individual Tax Returns (1040)

In the past two weeks, we’ve seen an over 6% drop in returns not started and a corresponding over 6% increase in completed returns. In 2019 the filing pace didn’t move the needle during the month of June. Tax season was long past, the next deadline was months away, and staff enjoyed their summer months.

This year firms are hustling to engage and complete client work. As we push these last six days before the deadline, you should be asking, if it isn’t completed or extended, why not? More importantly, if it isn’t started, will it ever start with your firm?

I mentioned in our last update that historically, 20-25% of individual returns are filed within the last two weeks before the deadline. While this statistic seems to be born out in the 2019 numbers, CPA Trendlines recently pointed out that there are 10 million tax returns that should have been filed by now “missing.” XCManalytics is also showing that approximately 80% of 1040 tasks whose returns are flagged as “work not started” haven’t been noted as extended in the system. The persistent filing pace lag, combined with IRS and XCManalytics data, leads me to wonder if professional preparers are losing out to DIYers. With an extended tax season, and most of us stuck at home, more individuals may have chosen not to use a preparer.

Evaluate your untouched inventory of individual tax work. If it’s significant, it’s time to reach out to those clients who have been radio-silent this year.

Partnership Returns (1065)

Partnership (1065) returns are, once again, continuing to hold pace with prior years. With less than a 2% difference between any of the return statuses, there are no statistically significant differences between prior- and current-year filing paces. As we head into the last week before the filing deadline, it’s time to energize the team and ensure a strong push toward the next deadline.

That never-ending pace, combined with the extraordinary times that we all find ourselves in, could compound and produce staff anxiety. If this is the case, consider following this advice from ConvergenceCoaching: take charge of your physical responses, make a list of the activities you plan to complete, focus on one thing at a time, review and evaluate your progress, and possibly most importantly, reward yourself for getting it done.

As with individual returns, corporate returns are continuing to close the gap over the past two weeks, with an over 5% drop in returns not started, and a corresponding almost 5% uptick in completed returns. The 1120C filings remind me of a quote from Taiichi Ohno, the father of Lean Manufacturing, “the slower but consistent tortoise causes less waste and is more desirable than the speedy hare that races ahead and then stops occasionally to doze.”

Much like the slow but consistent tortoise, over the last two months there has been a slow but consistent downward trend in the prior-year and current-year filing gap for corporate filings. In April, we saw a 10% gap in returns not started, and now as we approach the July 15 deadline that same filing pace gap is down to 5%. If this trend continues, I would expect to see the filing pace gap drop to 3% or less at the deadline.

As I mentioned in the partnership return segment, it’s time to start planning for post-busy season. Look beyond planning for extensions and the 09/01 and 10/01 filing deadlines to providing staff with the necessary mental and physical breaks that they need.

Concluding Thoughts

At publishing time, there are six days until the end of the 2020 filing season. This has been a unique busy season, and I know that many are looking forward to something resembling a break. Don’t lose sight of the finish line yet; be the tortoise and maintain consistency to the finish line. There are still a few things to wrap up before taking a well-deserved mental break, and one of them is reaching out to those 1040 clients who are at no information in.

I’ve been beating this drum since the beginning of this series, but it’s no less true now than it was in early April. Reach out to clients that haven’t reach out to you. Demonstrate your value, not only as a tax preparer but also as a trusted advisor. The alternative is potentially losing that client to another firm whose staff is more attentive.

Start thinking about what the traditional summer break will look like in this normal, and in the next one. Encourage your team to relax and regroup, and start talking with them about career development and goals. Encourage vacation time if possible, even if it’s just to unplug from work demands. Work will never demand less from us, so we all need to manage our boundaries. Be deliberate in your planning so that all of your staff, including you, have time to recharge and refocus.

Until the post-deadline season update, stay safe, stay healthy, and stay productive

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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