Tax time toolkit – Navigating the start of filing season

On this podcast, Mark Gallegos, a partner at Porte Brown, provides advice for getting ready for tax season. He discusses the importance of preparing staff, communicating with clients, managing workloads, taking care of yourself, and setting expectations. With the right preparation and mindset, the next few months leading up to April 15 don't have to be too difficult.

AICPA resources

 

Tax season resource center — Access the AICPA’s central hub for guidance, tools and developments throughout the tax filing season.

 

Beneficial ownership information (BOI) reporting — Access resources to learn about the beneficial ownership information reporting requirement under FinCEN’s Corporate Transparency Act (CTA).

 

Transcript

On today's podcast, listen to hear how to get a jump on your to-do list for tax season.

April Walker: Hello everyone and welcome to the AICPA's Tax Section Odyssey podcast. Happy 2024. On this podcast we offered thought leadership on all things tax facing the profession. I'm April Walker, a lead manager from the Tax Section and I'm here today with Mark Gallegos.

Mark is a partner at PorteBrown. He's on the Tax Practice Management Committee, which I'm the liaison for and he's quickly become one of my favorite volunteers. Don't tell any of the other volunteers, Mark, but I do mean that. Welcome.

Mark Gallegos: Thank you for having me appreciate it.

Walker: We're recording this today on January the 17th and as always, there's a lot of noise in the tax world. There's potential for tax legislation, there's an impending government shutdown, there is filing season is getting ready to start in a couple of weeks.

I thought it would be nice to remind our listeners to take a deep breath, first of all. But, then I'd love to hear what's on the top of your mind as we're getting ready to take a leap into tax season. How does that sound Mark?

Gallegos: Sounds great. I think there's a lot to unpack there.

Walker: Absolutely. Start at the very beginning. What are the top couple of things on your to-do list today? What are the most urgent items that you're trying to get accomplished in the next couple of weeks.

Gallegos: Yes. Right now, there's a number of things.

One, from the firm's standpoint, making sure everyone's up to speed on everything we do to get ready for tax season. We're already in the flow of it as a firm from the audit department and accounting and consulting department. But for the tax side, really getting them up, ramped up and ready to go.

As a firm, we are very processes- and procedure-driven. We break out into teams and trying to figure out what's the best practice for us as a firm to truly make sure everybody is prepared as we go into the preparing business returns, trust returns, individual returns, and everything else that goes with that.

We spend a lot of time trying to meticulously make sure that our system is proper, so we're doing a lot in that area.

Then you have making sure everyone's up to date on all tax law changes that are effective for this filing season. The good thing is headed into the beginning of this year, there's not a massive amount of tax law changes.

However, yesterday there was an agreement between Senate Finance Committee and the House Ways Committee regarding a potential tax legislation. Again, just an agreement, not law. But as I look at that and I start to communicate with the firm, some of these things could create issues within our firm, in our planning.

One, if these provisions are enacted, when would that happen? How does that impact our tax season? How does that impact the software provider we use to be able to roll out any changes so that we can be streamlining this process. You have that going on.

At the same time as a firm, dealing with our clients. One of the things is communicating with your clients. So at the early part of this stage, letting clients know, there's potentially is a government shutdown that's looming. We've let them know in the fall, but here we are on January 17th and we still have this throughout tax season that we may have to deal with, which affects a lot of things, not only the client, but also us.

If there was a shutdown of the IRS [could] furlough two-thirds of its employees and then you would have assistance centers closed. But the reality is if you have to paper file returns or if you have to call the IRS or if you [hear] I got this notice. We set the response in on behalf of the client. Clients say, Mark, what is the status of this and you can't talk to the IRS now. You can't get a response, but they keep getting a notice saying, you owe money, just automatically coming out.

Those are the headaches that I always say could take your tax season as a preparer off track. It's the client is assuming you're handling something, you're relying on the IRS hopefully to resolve something and in the meantime, you're just that middle person trying to field the questions and resolve it. If they get shut down in some form or fashion, it really comes into play where we get hampered.

Communicating with the clients, communicating with the staff, communicating with just everyone in general [that] this is looming out there. Let's do everything we can to get on top of it now, let's not wait on things, let's be proactive. I think that's one thing I believe that's very important.

The other thing is that we can't file a tax return until I think January 29th…is when they opened the E-file system I thought I saw. We got time before we have to file returns, and even with having software completely ready, not every form is out of draft yet.

But with that being said, small clients, rentals, and small businesses, get those books in. If they're using QuickBooks or whatever, get it in and let's get going on this stuff. Let's not all push it off [and then say] wow, it's February 28th and we got all these returns we want to try to get out the door. The more you can do up front, the more you are going to make your life easier as the season goes on.

Again, we don't want anyone working so hard that they're all stressed out right now, we need their energy for later. On the other hand, it's not a sprint, it's a marathon, and we need people in the firm to really manage their time. Sometimes we have to, as partners and as managers, manage their time for them. We need them at the end when we're trying to get all these extensions done or filing returns. How do we do that? All these things come into play [and] that's on my mind right now.

In addition to that, we got this new thing that's out there, beneficial ownership interest, part of the Corporate Transparency Act that started in January and we've dealt with as a firm. I'm sure every firm, every practitioner out there in some form or fashion is dealing with this right now.

As a firm, we have taken the position that we're not going to prepare it, we're not going to advise on it. We're not going to do anything. What we've done is we're letting all our clients know that. There's plenty of people in where we are in Chicago land area that do this and we're happy to refer them to attorneys if they don't have one, to other groups that do this, but we're not taking that work on.

We've come to that conclusion based on discussions internally with our outside counsel. But everyone needs to do that on their own to determine is this best fit for you and everything else going forward. If you are listen to this and you don't know anything about the beneficial ownership interests, recommend there's plenty of information out there on it.

Walker: We'll point to a couple of podcasts; we'll point them to the resource center. Absolutely. ASAP, you need to get on board with what's going on with that.

Gallegos: But it's an area that again, without getting into [the details of it], it doesn't really fall on the tax preparer side as far as the compliance aspect of it, from an IRS standpoint. However, what I have seen [with] questions coming from my client, is this part of FinCEN?

You guys file my foreign bank account reporting the FinCEN [Form]114, so why wouldn't you do this? Having those conversations, educating your clients as to what you can do, what's in your purview as a preparer and what's not. I think the more you communicate, the more your clients will value your service but also know that you're still their trusted adviser and you're here to help them get to the right people to do so. That’s it.

Walker: You gave me a lot to unpack there, Mark. Let's see. Let's start with you said you're getting your staff ready and you're communicating with your clients. There probably isn't a one-size-fits-all. But what's your best tips for communicating with clients if you're trying to do either mass communication or how do you wrap your head around that?

Gallegos: We can do mass communication as easily as an email blast. We have our news blog that goes out every week and so from that standpoint, we sent out. You and I know not every client reads emails or ignore them and you know how it is.

From that standpoint, it requires everybody in the firm to be on top of things. Meaning, we like to go out to the clients. We want to be in communication with the client. It's not like, April, you're my client. I'll talk to you next year. See you then. We're all year round. We do a lot of year-end tax planning for everybody. We really are heavily involved. [There are] a lot of touches throughout the year.

With that being said, this time of year where you have clients, whether it's making sure they're getting their books in order or [they need] 1099s or whatever the case may be from a compliance standpoint in January. [We] reach out to them, not just on making sure you're getting things together, but here's some other things that I want to make you aware of based on the filing season, based on everything else.

Because what I have seen, at least with our client base, is most clients want to get things rolling and get done with this aspect of it. Whether they ought to extend later or not, that's a different story, but they want to know where they sit.

Like I said, so we have this system where we have not just the partner but managers and people that are in charge of clients and all the staff that are on those particular clients. It's all budgeted and all put together. And there's a team that literally is reaching out to all these clients.

For example, my clients, there's no way I can sit around just talk to every client all day, I would never get off the phone. So I have to rely on people and delegate that work down so that people feel empowered to do that. In doing so, one, it gives them the ability to build that relationship with the client. But two, really shows that as a firm, it's just not me and a few partners — it's everybody…has a key role in making sure that the client is up-to-date on what's going on. Not only what we want to communicate, but vice versa — what's coming from the client and so we are aware of whatever concerns they have. Very important.

Walker: Not everybody listening to this is going to be a big firm so they aren’t going to have a lot of people. But I feel as I talked to members and as I talk to CPAs, you hear so much about you doing everything. I think that's a good lesson learned.

Maybe you can't change that in January for this year but try to figure out ways that you can delegate work and client responsibilities and it's okay to let it go. I feel like that's a message that a lot of people need to hear if you're proactive about it and you're still staying in the loop, of course.

Gallegos: Very important there, April. One of the most important things, I don't care if you're a small firm or a large firm, I guess the bigger you are, you have more resources. But as a firm we even use, we have interns, we bring in. We have admin. We probably have more admin than most firms our size and we use the admin for all kinds of functions. The reason why is the more I can delegate down.

I think sometimes as a partner we can get to these assumptions of how important we are. Oh, everyone needs me and I'm that important, blah, blah, blah and all this. Maybe it strokes our ego or whatever.

But the reality is, if you stepped away for a few weeks, these clients will be taken care of. You really not as important as you think you are. I think the more you learn to delegate — I have learned in my career — the more free you are to say I'm working not in the business, I'm working on the business so I'm truly helping this place grow and I think that's important.

Walker: Yeah, great point. You also talked about starting strong in January, like having a good January and that to me leads into hopefully a smoother tax season. Again, there are some out of your control. Is there going to be a tax law that's going to have retroactive changes? We don’t know right now yet again, Wednesday the 17th; we don’t know. Hopefully we'll know more soon.

I liked you [saying] it's a marathon, not a sprint. How do you manage that increased workload? People like to control their own schedule. I certainly like to control my own schedule, but I also sometimes I need to understand what are my priorities. How do you make that balance work?

Gallegos: One of the ways is we budget. Every client got a budget, whether if I'm using taxes for an example, tax prep, tax review, partner review, signer review to admin. Every step of the way, we’ve got a workstream step and we got to put some time to it. Again, it's not a perfect science, but the more you do it, the more you realize how much time [things take].

Then from that we have some amazing people in our firm that take all that and budget. Okay, April, you are one of my staff, I'm going to assign this client to you and it's for X amount of hours, it's going to fall in this week or this particular day, or I need you to be at this client. We're managing schedules that way.

Workload management, the planning that is involved is all year round. Again, things happen, people get sick, people leave, people come in. It’s constantly changing — it's fluid. But understanding how we work and do the workload management that makes sure that if I have two staff and one person's working a crazy amount of hours and the other person's not. The person not working most likely is because they just don't have the work assigned to them.

As a partner, I can get caught up [with] my own work and I know I need to get work [done] but I'm just not pushing to do that. When we have people managing this process, we know that it gets spread out more evenly. It helps the workload management so no one is truly working more than the other person. That's important, very important. We're a team and everyone needs to help out in some aspect of it.

I think that is probably one of the best things we do as a firm to help our employees and keep that longevity. We don't work crazy hours and because of that, we get a lot of work done. I wouldn't say it's the easiest amount of hours, but a reasonable amount compared to what I’ve seen out there.

Walker: Got you. Yeah, that's good. That's probably a whole another podcast episode where we can talk about and delve into that. Because that's not a 20-minute conversation, but great point.

How are you personally handl[ing] the stress and long hours that come with tax season? I know because I've gotten to know you over the last little bit how much you love your job and tax and so you probably work a lot, but hopefully you also take some time for yourself. How do you manage that?

Gallegos: Yeah, I do love my job. I love what I get to do. I find it a privilege. On the other hand, making sure that I'm healthy in the process because if I'm not healthy than all this is for naught. I wouldn't say I'm mechanical, robotic, I guess it could be viewed sometimes, but I get up early in the morning and go to the gym and workout. Again, depending on the day, the week and where it is in the season, I go and I feel great. Even if it's like just stretching and light or whatever, I feel great. It kicks my day off on a positive note. Then from there, you head into the office and you just manage your day properly. Whether you're going to clients or whether you're dealing with staff or whatever the case may be.

Then making sure that eating somewhat properly. It's so easy to like, I don't have time to get lunch or I didn't bring anything so let's hit a vending machine and that can get ugly quickly. You could just be eating sugar and carbs and everything that's probably you're not supposed to do. The idea is to try to manage your eating.

And then get some sleep There's no sense in work[ing] into two, three in the morning and then turning around and trying to do this again day after day. I know I talked to professionals that do this. I don't know how they do it and function. Get a solid night's sleep, whatever. If you need six hours, eight hours, whatever it is, you've got to figure out how to get that.

At the same time while you're doing all this, whatever your hobbies are outside of work, you still got to do it. I've always had the habit of Monday through Thursday I work my hard, longer hours within my little schedule. Then Friday, I’m always done at five. I don't care what's going on. I don't care if the deadline is Monday. I'm done at 5:00 and I'm gonna enjoy Friday night, whatever that looks like. Saturday I'll work, but I'm out working past 3:00 or 4:00 in the afternoon.

I've done that my entire career no matter whatever other pressure [there] is, and it's just my own way of keeping tax season in balance. So again, I always say everyone is different and everyone's got to figure out what works for them, but truly keeping things you like in your life. Just because it's tax season, it doesn't mean the rest of your world shuts down and it shouldn't.

I think some of the stress that gets created in this is probably from our own doing. I'll give you a prime example. You're working and you're like, I'm going to get all this done this week, and then a client calls, no, I'm going on vacation, I need my return now. And then okay figure out how to get this done even though it's not scheduled. And oh, there's another issue. All these things pop up and we just let all that stress just get to us. Oh my gosh, how am I going to handle this. Instead of just, hey, it's fine. Take a deep breath and let's just put it into a process, and let's just get it done in the order, and communicate what expectations look like, etc. You feel so much better because everyone's on the same page. No one's putting the pressure on you, we're just doing it mostly internally and you feel better. So again, we sometimes just got to get out of our own way to make things happen.

Walker: You're right. I probably needed to hear that today myself. Because even though I don't work in practice anymore, I still have like crazy things going on and deadlines, so I also need to hear that. Take a deep breath. Step-by-step. Wonderful. So I like to hear your best advice for our listeners to ensure a smooth and successful tax season.

Gallegos: So number one, I think besides taking care of yourself, that would be number one, because if you can't take care of yourself, you're going to be no good to the rest of your team. That's number one, to manage your stress.

Number two, make sure that people that work for you are valued. Make sure that they know they're valued. Whether you're providing mentoringship or coaching to them, giving feedback. If you're someone who reviews tax returns, and you find errors or you find things that need to be adjusted, make sure you let them know what those are. Not, “I'm so busy. I'll let you know after tax season”. Because you won’t, and everyone thinks they're doing a great job.

The prime example of that — you could review a bunch of returns three weeks after a person prepared 20 returns, and they made the same error on all 20 of these returns. So the sooner you can get in and see, what little errors or what adjustments can be made and communicate that. Communicate it with some sort of grace of, it's okay, we all make mistakes. Because I know and I'm sure you did when you're a staff person, on the other end of these things, sometimes the feedback, especially if someone's in a hurry or maybe not in the greatest mood, can come across as the mistake I made is the worst thing in the world.

Again, I want my people to understand, it's okay to make mistakes, that's why we have a review process, that's why we check things. Let's learn and grow from it together and have fun doing this. Making sure your people are taking care of. You see that they're struggling. Let them go home or wherever you need to do to make sure that this is a place that is not only trying to get a lot of work done, but it's a great place that they want to invest in for their career.

Then beyond that, making sure you're managing your clients, they're not managing you. I know that's always a battle. The reality is they're paying you for a service because you have knowledge and you have the experience to provide them something that they can't get from someone else. Because of that, you have to let them know, based on my schedule that just because you called or emailed doesn't mean I have to drop everything now and turn to you and get it done. Then they have to understand expectations. But if you're always dropping everything to help them, then they're just always going to assume you're going to get it done. It's nothing against them, they're just like Mark responds to me. So why is he not now?

So again, understanding that, setting clear expectations with your clients is great leadership for the rest of your firm too, so they see, if Mark's doing that, then maybe I can follow the same methodology. I think that's good. And learning from each other in the process. That to me if you can find a way, there's no perfect sauce to this, but if you can find a way to start working towards that, I tell you, this three-and-a-half months or whatever it is to April 15th, it's not that bad.

Last week I was at Fort Lauderdale speaking, and then I flew back and then we had 14 inches of snow, and then it's been like -15 degrees here. I'm going to say tax season doesn't bother me when it's -15, but as it starts to warm, and the sun comes out and spring is in the year. Boy, it makes it harder, right? The more upfront we can manage some of this, we get to the end and everyone's going to be happy.

Walker: Lovely. I think [that is all] great advice. If you are a listener of this podcast, you know what's coming next, which is in closing on the podcast, I like to think about all of us taking a journey together towards a better profession. Tax Section Odyssey — we're journeying. I like to get a glimpse of my guests other journeys outside of the world of tax. You said you were in Fort Lauderdale, but that doesn't count because that sounds like it was a work trip. Give me a page from your travel journal, or a bucket list, or something you've got planned for the horizon.

Gallegos: For this year I have a beach house already reserved in July for the Outer Banks, North Carolina. Every year, I always go to the Outer Banks. I love the Outer Banks. Why? Because it's the ocean, the beach, and because I've gone there so much, I find it a place where I can relax. Where you could just sit back, relax, have a good food, spend time with your family, and just enjoy the water and the beach and the sand. Again, I look forward to that. I do other little things throughout the year, but that to me is like the one thing I look forward to more than anything.

Walker: Wonderful. The Outer Banks is beautiful. I’ve been there many times being from North Carolina but highly recommended. Thank you so much, Mark. This was insightful, delightful. It was a great way to start off our podcast season for 2024.

Again, this is April Walker from the AICPA Tax Section. This community is your go-to source for technical guidance and resources designed especially for CPA tax practitioners like you in mind. This is a podcast from AICPA and CIMA together as the Association of International Certified Professional Accountants. You can find us wherever you listen to podcasts. We encourage you to follow us so you don't miss an episode. If you already follow us, thank you so much and please feel free to share with a like-minded friend. You can also find this on the aicpa-cima.com/tax and check out our other Odyssey episodes, as well as find resources that are mentioned. Thank you so much and have a wonderful start to the tax season.

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