There are a lot of factors that websites and analysts have cited for the ever increasing number of last minute tax filings, and those numbers are pretty shocking. In 2016, the IRS collected 29 million returns in the last 2 weeks of tax season (April 8-22). This year, there were 32 million returns collected in about the same time period — 17 million of those were in the last week alone. PLUS 11.6 million extensions! That is a 10% increase year over year for late season returns filed and a 1% increase for extensions. Everyone in the industry is looking for answers.
Was it the EITC/ACTC delays? Is it the economy? The new government administration policies? These were all probably related factors. But there may be a more influential force at work; reinforced laziness.
Many believe that online tax filing products (DIY tax prep software) have instilled a false sense of security. We live in a age of ever-increasing automation and instant gratification; so why shouldn’t tax prep follow suit? When you can walk in to your local supermarket and toss a box of Turbo Tax in with your cheese and bread, why NOT put off the task of filing? Post a funny cat picture on Facebook and file your taxes online at the same time! After all, the inferred claims of quick, easy, hassle-free, and simple are all trigger words that tell the consumer there is nothing to worry about. The tax box also does it on the cheap. Why pay the expense for a professional tax preparer when YOU can be your own expert for $54.99?
The culture of procrastination typically comes with consequences. While the software packages will walk people through the forms, they cannot provide true insight or advice… or help keep track of necessary documents. Online prep cannot easily answer questions about deductions and special circumstances. It is not going to tell the customer that, if they owe, the government expects payment by the last day of filing. Meaning, if you file at 11:59pm and it turns out you owe money, you have to pay the IRS before the stroke of midnight, lest you start accruing interest. That interest of course starts immediately. Fines and penalties for not filing properly do not have a grace period.
Here is the bottom line: we should not be surprised that taxpayers are putting off something they do not want to do because they have the technology that allows them to wait. How the professional tax preparation industry starts to confront this will make all the difference in the coming years. It will matter to you in your town and it will matter to your competition and colleagues across the country. The industry is changing, but in a way that is not unpredictable. The fight for dollars is now a matter of getting your clients out of the house and into your office while becoming prepared for a reverse season rush. At the beginning of this year, 56% of all returns were self-filed. Adapting to consumer habits is part of being a smart small business owner. Using this knowledge and these verifiable statistics can allow you to make the appropriate adjustments to your business – regardless of when next year’s surge arrives.
If you want to check out filing statistics for 2017 compared to previous seasons, click here.
To view the filing statistics for Turbo Tax this season click here.