Art of Accounting: Which tax returns should you review first?

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It doesn’t get any busier than it is right now. Question: Which has more priority — reviewing a return that would take two hours to complete, or reviewing 12 returns that would take 10 minutes each? We all have these issues to confront. Here are some suggestions.

First, the reality:

• They all must be reviewed.
• Each return is very important for each client.
• The fee for the return that will take two hours to review might be greater than the fees for all 12 10-minute returns, but you still have the responsibility to get all the returns done in a timely way.
• The risk of error is substantially greater for the two-hour return than for all 12 10-minute returns combined.
• Your exposure for liability is much greater on the two-hour return.
• The chances are that errors on the two-hour return would need the original preparer to fix them, while the reviewer or anyone else could fix any errors on any of the 12 returns.
• The two-hour return would remain on your mind until it is delivered to the client, while it is probable that none of the 12 will. However, the pressure of the “pile” would be on your mind.
• You have limited time resources and need to allocate the time as propitiously as possible.
• If the returns are not done on time, you will face 13 phone calls or emails to follow up. Would it be better to get the 12 done and only face one phone call?
• All of the returns need to get done, and will. The only issue will be when and in what order.

My suggestion:

• Have the two-hour return reviewed in two, one-hour parts. This will be slightly inefficient but will avoid having the reviewer get as backed up as they would if it were reviewed in one stretch. Allocate the two hours over two consecutive days and have it worked on first thing in the morning. Also, when the second hour is being done, have the preparer available to fix any errors and have the return re-reviewed as soon as those errors are corrected. This will create some efficiency and have the return fresh in the reviewer’s mind.
• After the early hour on the big return, have the 12 reviewed and get them out.

This is an exaggerated scenario, since you will have many more returns than these, but the situation would be pretty similar for every 13 returns. If you have a practice where you do not have very large returns, then this would not apply to you. If you have a practice with small and large returns, this is a good model to follow. If you have a practice where you have all large returns, then this would apply since some of the returns would be significantly bigger than the others and you would need to make this time allocation.

You are managing your practice during the busiest time of the year, and you need clarity about what you are doing. Spend the last 10 minutes before you leave the office each night planning the next day. I believe these 10 minutes will provide that clarity.

Have a great tax season!

Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions or about engagements you might not be able to perform.

Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People list. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” He also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com along with the Pay-Less-Tax Man blog for Bottom Line. He is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where he shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. He welcomes practice management questions and can be reached at (732) 743-4582 or emendlowitz@withum.com.