What You Don’t Know About Tax Season and Extensions
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What You Don’t Know About Tax Season and Extensions
I’ve now had the pleasure of being an owner of a tax firm for almost a year and a half. Now that we are in the midst of our second tax season I can officially say I’ve learned a ton about this industry. I thought it would be neat to educate and share my findings, along with misnomers in hopes of giving those that are curious a glimpse behind the curtain.
The “Main” Tax Season
The biggest thing I learned is the sheer impossibility of what the IRS gives us to complete by 4/15 (or this year 4/18). I was probably like many of you that demanded to get my taxes done as soon as possible. Here is the perverse reality, it is nearly an impossibility for any quality tax firm to complete. The challenge is that the bulk of data comes in at the end of February to early/mid-March. This gives the tax firm essentially 6 weeks to complete a year’s worth of work.
I know what you are thinking, just add more staff. Well, if there were more staff to add that would be a brilliant idea. Sadly, the tax industry is going through what many other industries are going through, a dearth of quality talent. Job recruiters have zero applicants right now and the job boards are littered with openings and no one to fill them. Now all is not lost as there is some industry-leading technology that is out there to assist in efficiencies, but the harsh reality is it still leaves an industry understaffed.
Extensions Aren’t A Bad Thing
As I stated above, I previously always demanded my taxes get done as soon as possible. My CEO and I spent a ton of time in the off-season speaking to other well-established tax and CPA firms. What I learned, is much of what we experienced. Most tax firms are stuck extending about 30-40% of their clientele. The main culprits are what I stated above as far as 6 weeks and not enough staff to handle things by the ridiculous IRS deadline, clients getting their documents in late, incomplete data or slow response times on missing info, or some combination of the three.
Public service announcement warning…. The good news is that it is normal, and an extension simply buys you and the preparer time to make sure your taxes are filed correctly. It is very kind that the IRS gives you until October 15th to actually file, although it’s a cruel reality that they make sure estimates and penalties are filed prior to the April deadline.
If working with a tax firm like ours, they generally handle the filing of an extension along with making sure everything is in good order to avoid issues. That said, the simple fact is even I have gotten used to the fact there is a good chance I’ll get extended. It isn’t a four-letter word (actually 8 letters technically), but I wanted to demystify this one as many people still feel it comes with some sort of negative connotation. Heck the IRS isn’t even done going through all last year’s returns yet!
The Tax Season Is Year Round
We are all engrained in knowing the April 15th tax deadline and assume that is it – that April is tax season. Well, newsflash I thought the same exact thing! Welp, I was dead freaking wrong as there is a March 15th S Corp and Partnership deadline, a May 15th Exempt Org deadline, quarterly estimated tax deadlines, September 15th Corp deadline, and October 15th extension for filers deadline to name a few.
I don’t know if you work in an industry with job deadlines or not, but simply put it is a ton of pressure for these kinds of tax preparers. Now, certainly some times of year are busier than others, but contrary to what I at least thought, they don’t have the pleasure of taking off 10 months a year simply because they do a year’s worth of work in 6 weeks.
Although there are challenges in this business, like any other business I love being an owner of a tax firm. It gives me unbelievable insight into a critical service business for our clients, along with a great value add to those that choose to use Diversified Tax. I still feel it is a great service and for a nominal price is truthfully way undervalued. That said I have learned a bit of patience when dealing with any CPA or tax preparer, especially during the throws of tax season.
In addition, I now fully understand the need for extensions and the huge benefit they provide for both filers and preparers alike. However, our intent is certainly not to extend anyone, especially those that come from our Financial Planning company (although it certainly will happen if you don’t return your paperwork to the tax team by the date they need it).
So, going into this tax season I want to first thank every one of you that has chosen to entrust this valuable service to our amazing, and I mean amazing, tax team. Ed, Samantha, Charlie, Dennis, Jess, and Rachel are amazing people that do phenomenal work, although sadly suffer from the fact of being humans haha. I also want to thank you in advance for your patience as they work through this insurmountable task with the utmost care and love. I get to see the behind-the-scenes of how much these people truly care about them and our clients, and I’d be truly remised if I didn’t end on that note.
As always stay wealthy, healthy, and happy.
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