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Tax & AccountingOctober 22, 2020

2020 Tax Season in Data: 10/15/2020

Welcome to the ninth installment of the tax season in data, for the period ending 10/15/2020. Congratulations, tax filers, the last deadline of the year has passed!

By the time this publishes, you’ve hopefully had a chance to take a breath and appreciate the hard work you did. So, before delving into planning for next year’s busy season, let’s take a look at how the nation handled this extraordinary tax season with a look at the last tax season in data update of the year!

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.

Throughout the tax season, we’ve utilized XCManalytics to compile this years’ data for 1040, 1065, and 1120-C returns and benchmark them against 2019 returns, providing the tax community with insights into the pace of the 2020 tax season.

Individual Tax Returns (1040)

At the 07/15 and 09/01 updates we started to see signs that the filing gap for completed returns was closing. Unfortunately, as of 10/15, our data shows that gap has widened again, and as we end extension season there is a 5.4% difference between 2019 and 2020 completed returns. In our experience, year-over-year differences in work left uncompleted typically arise because:

  • The return is not being filed by the firm this year, but this hasn’t been noted in XCMworkflow
  • The return is complete and has been filed, but firms processes haven’t been followed to “complete” the return in XCMworkflow
  • The return is being filed late

In general, the difference is usually traced back to one of the first two bullets.

We should note – and celebrate – that 1040 returns have made significant gains throughout the entire extended filing season, going from a 22% gap in returns not started on April 01 to 3% on October 15.

As we begin to look towards the 2021 busy season, it will be interesting to see how firms apply the lessons learned during this unique season to better support clients and staff. For more on this, see my concluding thoughts.

Partnership Tax Returns (1065)

As mentioned in the 09/01 update, partnership returns have maintained a consistent year-over-year pace throughout almost the entire extended 2019 filing season. However, as with individual returns, as of 10/15, we see a slight gap – 4.5% – between 2019 and 2020 completed returns and a 2.9% gap in returns not started. As with individual returns, the gap in uncompleted returns is most likely due to the return not being accurately accounted for in the workflow solution or because it is being filed late.

We know that much of the early success can be attributed to the combination of a March deadline and COVID-19’s appearance in the US. However, with the level of consistency partnership returns experienced when other return types were not seeing the same success, firms may want to review partnership processes. Consider how these processes can be applied to other tax workflows for the 2021 busy season. For more on what to look for, see my concluding thoughts.

Corporate Returns (1120 C)

As with both partnership and individual returns, 1120C filings, after a strong 09/01, have dropped back slightly as of 10/15, with a 4.8% gap year-over-year for completed returns and a 3.8% gap in not started returns.

As I mentioned in the 09/01 update, we are past the tax season window where the percentage of unstarted returns could be attributed to returns identified as needing an extension. It would behoove firms to research those clients who have stalled in “not started” and determine how to correct this.

Concluding thoughts – preparing for next season.

Now that extension season is finally behind us, it’s time to turn the focus to 2021 and the next busy season. By now you have no doubt started planning to review, or have already started reviewing the last busy season with a critical eye. During the review process, make sure to consider:

  • Workflow processes and possible areas for improvement.
  • Current technology configurations. Determine if your current stack is supporting your staff the way it needs to be supported.
  • New and different collaboration tools with an eye towards your current tech stack to see if there are newer and/or better tools available to support your staff.
  • The current status of all data. Now is the time to be cleaning up data.
  • Opportunities for tax automation.
  • Potential tax outsourcing as part of your overall tax season strategy.
  • The types of review points and evaluate training programs related to those themes.
  • Staff evaluations based on work outcomes.
  • Analytics programs specific to operational excellence and business process metrics.

When looking for areas of improvement, pay special attention to client communication and outreach programs, staff productivity, and workflow process effectiveness. Now is the time to makes those changes that will allow your staff to better support clients, whether they may be modifying existing workflows to increase productivity, additional training for staff, or investments into new technology.

Until next year and the next busy season, 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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