Here we go again.  It’s December and many of you who have been in the tax industry for the last 20 or so years, as I have been, are bracing for a long and stressful 4 months.  Firms cram 12 months’ worth of work into a quarter of that time, asking employees to spend many 12-15 hour days making sure everything is right, fixing problems and pulling hair out.  Have you ever taken the time to stop and think about why it’s like this?  Probably not.  If you asked the question, the answer would likely be, “this is how it has always been done” or “there are other things we need to focus on over the other 8 months.”  Come April 15, most – firms want to shut the books and not think about tax season for a while.

Well, I challenge each of you to start thinking differently! 

What if prepping for tax season was a year-long event?  Sounds horrible at first but think about it, wouldn’t it make more sense to be reconciling and testing your data on, say, a monthly basis, throughout the year?  Making updates and adjustments as needed so that come December, the data you need for tax reporting is pristine and ready to go.  Starts to make sense right?  If the data as of year-end is clean it will lead to:

  • fewer corrected 1099s
  • less stress for you and your team,
  • fewer resources needed to handle tax season,
  • no surprises
  • and, most importantly, a better experience for your clients leading to a higher level of satisfaction.

Ok, it’s starting to sound interesting. What would it take?

First and foremost, you need to have a coordinated effort between your cost basis provider and your tax reporting vendor. The key is to ensure the data is accurate in preparation for your original 1099 forms being sent to your clients.

Currently, a significant part of tax season processing consists of producing cost basis files that are either sent directly to your organization or sent to your tax reporting vendor.  Your tax vendor will marry the cost basis file with the actual gross proceeds reporting record (the realized event/sale).  This can result in differences or mismatches between the two data sets that need to be researched and corrected.  Leaving this to year-end results in the need to reconcile 12 months of data in just 4 months (hence the reason the hair gets pulled out).

With our new way of thinking, this reconciliation would be done monthly, allowing adjustments to inconsistencies to be corrected throughout the year, delivering a clean data set when January rolls around.  To achieve this, you could have an internal team that works with the two vendors and focus’ on the reconciliation every month or you could work with your cost basis provider to outsource this function, having its team of experts deal with your tax reporting vendor and tackling the reconciliation.

So why aren’t you doing it this way?

Many firms continue to do it the old way simply because that’s how it’s always been done or, they don’t have the time or resources to manage it throughout the year, or maybe they just weren’t aware that their cost basis vendor offers these types of services.

I think we can all agree that cramming twelve months of work into four months only creates chaos and risk, and that hiring temporary resources to assist in these four months isn’t really the ideal situation.  I say let’s change the status quo.  At Scivantage, we offer services aimed at helping our clients simplify and streamline tax season, so they can focus on the more strategic aspects of their business.

Contact us to learn more about our tax processing services and how an enhanced tax reporting process can make tax season a little easier for you and a much better experience for your clients.