Tax Season and What It Means for Accountants

Anyone who intends to become an accountant and enjoy the financial security that comes with the career should know about tax season. Many professional accountants, regardless of the other business-related tasks they perform, earn up to half their annual income during just a few months of the year.

Of course, individual situations vary, but accountants who focus their practice on taxation fall into one of two general categories: those who specialize in individual tax filing and those whose clients are primarily small businesses. From a professional standpoint, there’s a huge difference. That’s because personal income tax forms are filed once per year, in April. Business filings typically take place on a quarterly basis.

What do these financial experts do during tax season and how do they get prepared for what can be their busiest time of the year?

People who want to enter the accounting field need to arm themselves with a few essential facts about the daily work life of accountants. It’s smart to learn about the different tax cycles, find out how to prepare for the “April rush,” and become familiar with common tax terms and forms. In general, prospective accountants need to know what skills are required to survive a busy tax season.

What is Tax Season?

At least once per year, but maybe more than that, accountants remind everyone that it’s the “busy season.” That usually means overtime, some weekend work, lots of telephone time, and likely some additional client meetings.

Personal Tax Season: Individuals who don’t own businesses make up the largest portion of tax filers, without question. Newly employed accountants, whether in private practice or in the employment of firms, tend to spend most of their time on these cases. Personal tax preparation is less complicated than partnership and corporate filing, so that is the usual entry-level task.

The good news is that there is only one major season for personal filing, and that’s in mid-April each year. In fact, there’s a mini-season as October approaches because a decent number of personal filers get six-month extensions.

Accountants end up with a personal tax busy season that runs from about early March (when they start putting in extra hours on personal filing preparation) until mid-April when the official, heavy filing season is over.

Then, there’s another burst of activity getting ready to file the extended returns from about mid-September until the mid-October deadline. Preparers who do corporate and partnership returns face a different set of deadlines.

Business Tax Season: Many small business owners pay taxes quarterly, which means accountants who do those returns face smaller, but more frequent, filing times each year. The middle weeks of January, April, June and September are the quarterly-filing and paying deadlines for businesses.

Partnerships and corporations are more complicated tax filers, with complex returns and different deadlines. Experienced tax accountants work on these returns. Corporations with a calendar-year cycle, often called S-corps, face a March 15 filing deadline but often opt for a six-month extension. Partnerships that work on a calendar year have an April 15 deadline, but they also like to opt for a six-month extension.

What does that mean for accountants who do these complex returns? It translates into two busy periods; one from February through mid-April and another from August until mid-October.

How Do Accountants Prepare for Tax Season?

How does any business owner get ready for the busiest time of the year? Tax accountants are no different from other independent professionals in this regard. Indeed, auto sales agents, real estate brokers, nurses, painters, entertainers, doctors and hundreds of other people in business for themselves endure seasonal cycles, ups and downs in income that result in slow months and hectic ones. But because the U.S. government mandates tax filing deadlines, accountants probably have the most defined professional “season” of any employment sector.

An Accountant’s Checklist for Tax Season

Every year brings new challenges for tax accountants and it takes a solid month to be adequately prepared for the tax filing season. There are some annual checklist items that every accountant should attend to as the busy months approach:

Make sure software is up to date

All the big suppliers add a few bells and whistles from time to time so it’s a good idea to make sure everything is current.

Stay on top of any changes in the code

Tax accountants need to keep an eye on small and large changes in the U.S. tax code. For example, the most recent Tax Reform and Jobs Act (known as TCJA or “tick-ja” to accountants) includes extensive revisions to personal and business tax laws, so this will be a very busy year for professionals who do all kinds of filings.

Reconnect with clients

Accounting is a business and it’s vital to stay connected with the client base during the “off season.” But as tax deadlines approach and taxpayers begin to receive their documents in the mail, accountants need to gather up important items like W-2s, 1099s and other pieces of the filing packet.

Double-check on secure data transmission

Tax clients should have a secure data connection via the accountant’s website for uploading sensitive documents.

Common Terms and Forms for Tax Preparers and Advisors

Business and personal taxation issues can be quite different but there are plenty of important terms common to both. Each kind of filing has its own forms, deadlines and special obstacles for clients and accountants. The following terms and forms are part of the core elements of tax accounting:

AGI – Wages, dividends, capital gains and interest, minus the allowed business expenses, IRA contributions, alimony and moving costs is the standard verbal formula for this most common of all tax terms. It helps to have it committed to memory.

Tax credits – Like a coupon for “dollars off”the bottom-line price of a retail product, tax credits are amounts that get subtracted from a final tax bill.

Tax deductions – Not like a retail coupon, deductions are amounts the IRS allows taxpayers to subtract from AGI before arriving at “taxable income.”

Standard deduction – A set figure, in dollars, that people can deduct from their AGI in lieu of itemizing. The new tax laws in 2018 changed this number considerably.

Itemized deductions – For taxpayers who don’t want to take the standard deduction, itemization lets them reduce their AGI based on specifically chosen expenses they had during the tax year.

Form 1040 – For individuals and couples filing personal taxes. This is the so-called long form.

Form 1040A – For individuals and couples filing personal taxes. This is the so-called short form.

Form 1040EZ – Taxpayers who are joint filers, single filers and have no dependents can use this simple tax form.

Form 1040NR – The most common non-resident alien tax form.

Form 1040NR-EZ – For non-resident aliens who have zero dependents.

Survival Skills for Tax Accountants

Whether an accountant has one or four tax filing cycles per year, the “busy season” can be a challenge for those who aren’t prepared, both professionally and emotionally. Skills needed to survive tax season after tax season of the peaks and valleys of the profession are part personal and part professional.

Wise business owners make sure to stay aware of changes in the law and to take the required continuing education courses. Accounting is a career that calls for continuous improvement. The U.S. economy is fast-moving with dozens of different business types and tax treatments.

A competent accountant should be ready to acquire new skills and knowledge sets as the business environment changes. At a minimum, successful accountants should possess, or be ready to acquire, the following skills:

Organization – Organization, and “attention to detail,”are at the top of any list for tax accountants’ job skills. Prospective accountants need to either already be good organizers or be willing to learn the steps for getting there. With so many forms, deadlines, rules, changing legal landscapes, and other professional changes, the accountant who has weak organization skills is not ready for tax season. The time to acquire organizational ability and an eye for detail are during the academic portion of an accounting career.

Time Management – Closely related to organization, time management is a specific skill that anyone can learn. It’s about setting priorities, making lists, meeting deadlines and knowing how much time it takes to do common tasks.

A good example is tax season. Preparers with experience and keen organizational skills have learned from experience that it takes about four hours to complete a simple tax return from start to finish. Armed with that data, a tax preparer won’t schedule more than two returns for a typical work day.

Flexibility/Adaptability – Laws change, clients come and go, coworkers are sometimes hard to deal with, and no two days are exactly alike. By embracing change and staying on top of the industry’s changes, accountants can build flexibility and adaptability into their skill sets. That makes every day a little bit less stressful.

Communication: Even solo practitioners need high-grade communication skills. Tax and accounting are idea- and concept-rich fields. Practitioners must explain complex situations to clients in simple terms. Accounting firms thrive on clear, open lines of communication. Prospective tax accountants must sharpen their ability to communicate even before they go into the profession.

Integrity/Honesty – Accountants deal with other people’s money, sometimes great amounts of it. Being responsible for someone’s wealth, prosperity and financial security demands the highest level of integrity.

Many accounting firms ask for multiple letters of recommendation, conduct thorough background checks, and tolerate no financial impropriety. Potential clients often choose individual accountants or firms based on reputation, so an honest image and high level of personal integrity go a long way in the profession.

Accounting, and especially tax accounting, is a financially and personally rewarding career field. It’s also one of the most demanding in terms of knowledge, education, basic skills, and dedication.

Education is the most important of the initial components of an accounting career. Those getting ready to enter the job market do themselves must focus on acquiring the academic background in accounting that will serve them for decades to come.

Interested in learning more about accounting during the tax season? The Accounting diploma program at Gwinnett College is designed to prepare college graduates to seek entry-level positions in the accounting and bookkeeping fields.  The college graduate may work as an accounts’ receivable or accounts payable clerk, bookkeeper, payroll clerk, accounting assistant or inventory control clerk.

Contact us to learn more about how you can become an accountant or bookkeeper today.