easy ways to avoid ‘done but’ tax returns

change mentality and ask better questions to eliminate bottlenecking.

by frank stitely
the relentless cpa

a project hung up in process is one where there is a disagreement between people involved in a project as to the status. for example, a client thinks he has answered your tax return questions, while you believe he has not. another example is when a tax return preparer believes a return is ready for review while the reviewer does not believe it’s ready.

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the result of a hung-up project is a dead project – one that’s not moving to completion.

if a tax return gets hung up, eventually your client calls you, and you get to waste time determining why the project stopped moving. this increases work in progress (wip), which increases turnaround time.

for example, a tax preparer, bill, sends jane, the reviewer, a corporate tax return for review with the following comments:

1. i assumed there was no stockholder health insurance as the client didn’t provide it – please confirm.
2. i couldn’t get m-1 to balance. please take a look and let me know where i went wrong.
3. i entered the new investor loans as current liabilities – please confirm.

has a preparer ever done this to you? we call these “done but” returns. the returns are done, but they’re really not. they are not ready for review with open points. a couple of the points require client input that should have been sought at an earlier stage of the project.

thus, the review is not a review, but a re-preparation combined with a review. this is a project that will stall in process as the reviewer knows this one will require a lot of time. it falls into the abyss of hung-up projects.

another equally undesirable preparer-reviewer situation is the court brief. a court brief happens when the preparer sends a project to review with voluminous notes.

here are some examples of items from court briefs written by preparers:

1. i treated the federal withholding on the w-2 forms as federal tax payments on page 2 of the 1040.
2. i put the self-employment income on schedule c – please confirm.
3. i didn’t know what to do, so i just … (fill in some version of “messed up” here.)
4. why do i have a basis schedule?
5. should we have asked for the social security number for the new child?
6. is the new child a boy or a girl?
7. we need direct deposit information.

i have seen so many of these. these are all attempts to evade responsibility for the final product to be delivered to the client. this would be another “done but” return.

the solution to “done but” projects is a change in the mindset and behavior of both the preparer and reviewer.

first, the preparer’s mindset must transform from data entry clerk to some more advanced state of enlightenment. the preparer is accountable for providing a completed project that can be delivered to the client. the preparer must not deliver a “done but.”

second, kick “done but” projects right back to the preparer. do not reinforce the behavior of delivering junk to the reviewer.

true, some of the preparer notes scream out for more training and some are just laziness. the training must occur. hopefully, you are doing this before tax season. but if you have assigned a return to someone without the skills to successfully complete the return, the training must happen before the return gets to review. pushing the training ever later into tax season from the preparation stage to the review stage is just stupid time management.

change the behavior of your reviewers, as well. they must kick the “done but” returns back to the preparer. fixing the mistakes reinforces bad preparer behavior. if an incomplete return is coming back to them, preparers learn that completing the return is more efficient for them than delivering a “done but” and getting to fix it later.

next, let’s discuss projects hung up between clients and preparers. after 31 tax seasons, i swear to god that some clients enjoy the tax preparation process so much they want it to last forever. here’s how they do that. first, they answer questions with questions. for example, the preparer asks the client, “how much did you pay in personal property tax?” the client responds, “how much should i have paid? did i pay too much?” rather than getting a number as expected, the preparer receives a series of questions. how much closer is this return to completion? arguably, it went backward.

another way a client extends the engagement is by answering with non-answers. for example, the preparer asks, “how much did you pay for that ford stock you sold in june?” the client responds, “i’ll get back to you.” the status is right back where it was – nowhere. the preparer creates another questions list consisting mostly of unanswered questions from the first list. more wip. slower turnaround time. worse yet, the wasted time could have been spent on another return.

there is no perfect, simple answer to fixing client behavior, but there are ways to reduce the impact. first, ask better questions. ask for what you really want. consider the possible ways your client can misunderstand your question and try to eliminate the misunderstandings up front.

consider a question about real estate taxes. a new tax preparer might ask, “did you pay any real estate taxes?” the problem with this is it’s a yes/no question and the preparer really needs a dollar amount. another example would be if a preparer asked, “what’s the basis of the ford stock that you sold?” first, would the client understand the term “basis”? second, the client may not have any idea the stock was sold and may need to contact the broker. a better way to ask would be, “how much did you pay for the ford stock that you sold on april 12th? when did you buy it?” the preparer might then post a page from the brokerage statement showing the sale and advise the client to consult with their financial planner for the information.

another form of client torture is when they ask a dozen or more questions about a draft return, which normally only happens on balance-due returns. there’s little choice in this situation but to answer point by point. unfortunately, this will add time to wip and increase turnaround.

however, there is a possible solution. consider a hypothetical situation with two returns identical in every way except the first requires no meetings or phone calls and the second requires an initial meeting and three phone calls. for most firms, the bill would be the same. the same forms are used for both returns, so they have the same fee, right?

instead, try putting line items on a pricing schedule for meetings, phone calls and multiple tax return drafts. the key isn’t to get extra money. it’s making clients aware that they could be charged for these behaviors and thus discouraging those behaviors. it may take some time for it to work, but eventually, there could be a resolution to clients needlessly delaying returns and running up firm costs.

these are just a few ways projects get hung up in process. they all have in common someone incompletely performing a workflow step and then handing off the project to the next person. this can be staff. it can be clients. the way to combat staff handing off incomplete work is to force them to complete the work before being allowed to hand off the project to the next person in the workflow line. the solution to stopping clients from hanging up projects is asking better questions.

while you will never be able to completely eliminate projects hung up in process, you must be the ceo of your firm and search for projects hung up in process. this won’t leave much time to personally prepare tax returns – which is a good thing for the growth and development of your firm.

posted on january 17, 2023