It was just weeks before the start of tax season, Thomas Scanlon’s busiest time of year, and the Connecticut accountant still had two open slots he wanted to fill at his firm.
The president of Borgida & Co. in Manchester, Conn., had already sifted through the résumés of people without accounting degrees when he finally found one job candidate for the administrative and accountant roles.
They arranged a job interview for early January and that’s the last Scanlon ever heard from the woman. “Whatever she wanted she could have had — if she showed up and asked for it,” he said.
Now Scanlon and his staff are capping the numbers of tax returns they are handling this year. They’ll likely take on 1,100 to 1,200 returns this year. Another person on staff would have enabled Scanlon’s firm to handle an additional 100 returns, he said.
“Stories of tax preparers already setting limits on their returns are much more common this year compared to last.”
Drawing a line was the smart thing to do, he said. The backlogged, understaffed Internal Revenue Service acknowledges the window to submit income-tax returns could be marred with delays, swamped phone lines and general frustrations.
“If you don’t have the bandwidth, you’ve just frustrated people even more,” Scanlon added.
In Carthage, Mo., Mike Zeiter of Zeiter Tax Services is increasing the number of returns he will handle this year. He’ll prepare 350, up from 270 last year. But clients who wanted Zeiter’s services had to tell him by the end of 2021. Zeiter might be able to do the taxes of people who get their requests in later, but he said they would likely have to file an extension.
Like Scanlon, Zeiter didn’t want his client list outstripping his capacity. Not when he had his own problems hiring staff. “We were ghosted by some prospects,” Zeiter said, who now has four full-time employees, plus another part-time accountant.
Before getting to that point, three candidates didn’t arrive for interviews and another showed up for the interview, but Zeiter was unable to reach her afterwards. If he had more staff, Zeiter said he might have been able to handle more returns.
Stories of tax preparers already setting limits on their returns are much more common this year compared to last, said Nina Tross, liaison for tax and advocacy at the National Society of Tax Professionals, an organization with 3,500 members. “They are hitting capacity, there’s no question,” she said.
Less capacity to help people
Treasury Department and IRS officials are cautioning things could get rocky once people submit their tax returns. But there’s a chance taxpayers are going to find frustrations before they get their taxes sorted and submitted to the government.
If many preparers are stretched by the country’s labor shortage and worn out by two prolonged tax seasons during the pandemic, that’s less capacity to help people navigate an increasingly complicated tax code.
“You’re just hitting that stress point with the fatigue, and that’s probably why you’re hearing more of it this than last year,” Tross said.
The IRS expects more than 160 million individual tax returns this year.
Its January records show almost 780,000 people, including accountants, lawyers and enrolled agents, had IRS-issued identifications to submit federal tax returns as a professional on someone’s behalf. That’s up from almost 688,000 people with the identifications at the equivalent point last year.
Retail tax preparation companies with national footprints — and software that allows millions of customers to easily file online — don’t appear to be feeling the same pressures as smaller companies. They say there’s no scaling back their services or client capacity.
“TurboTax INTU, +1.92% has the resources and tax experts to help customers easily file their taxes,” said Lisa Greene-Lewis, an accountant herself and TurboTax expert. She said the company is expanding its services for customers this season after delivering 50 million individual returns to the IRS and other tax authorities last year.
“We at H&R Block HRB, -0.50% are fully staffed and ready to provide help both in-person and virtually this tax season,” the company said in a statement.
It may be a bother if someone needs more time to find a tax preparer this year because some are already maxed out. But if a low-income family needs a refund to make ends meet and requires tax-preparation help, that poses a bigger problem.
“The IRS works with organizations providing free tax-help through Volunteer Income Tax Assistance and Tax Counseling for the Elderly.”
The IRS works with an array of organizations to provide free tax-help programs through Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). Households are eligible for VITA if they make under $ 58,000 annually, and TCE is geared towards people age 60 and above.
In 2019, the programs prepared 3.6 million returns with the help of more than 82,000 volunteers, but in 2020 the programs prepared roughly 1 million fewer returns with 10,000 fewer volunteers, according to IRS data.
The number of tax returns prepared last year from these programs have not been released, but Laura Scherler, United Way’s senior director of economic mobility and corporate solutions, expects them to be on par with the 2020 decline and predicts lower levels again this year.
The United Way helps recruit and train VITA volunteers and runs VITA sites. But recruiting for in-person tax assistance is more difficult during the pandemic, she notes. “I’m sure that VITA sites are being as cautious as they can in terms of set up. But individual tax-preparation work does require you to sit across the table from someone and complete their paperwork.”
The smaller capacity for in-person help gives people the option of turning to a paid preparer or free online tax preparation, like the IRS Free File Program and the United Way’s own online services.
After last year’s mix of remote, in-person and hybrid help, VITA sites are going back to the in-person format as much as possible — but their services are constrained by how many people are running the sites, Scherler noted.
If someone “really wants the in-person VITA experience, I encourage people to make an appointment early. Don’t wait until April.”
Short respite from last tax season
David Tolleth, president of the National Association of Enrolled Agents and principal at Tolleth Tax Advisors in Holmdel, N.J., said tax preparers are working towards “not getting overloaded.”
Tolleth said he isn’t capping clients — but he’s not cheery about what’s next. “I’m not looking forward to it at all. I know there are going to be headaches.” That includes sorting out potentially inaccurate IRS notices, and going back-and-forth with clients trying to explain any refund delays, he said.
IRS Commissioner Charles Rettig has repeatedly said the agency is trying its best, despite budget and staff constraints. He reiterated that point on Thursday when the agency said it would pause certain notices to avoid taxpayer confusion.
“Our employees have worked hard, long hours during the pandemic to assist taxpayers and successfully modify our systems, despite lacking the funding that we need to adequately serve the American people,” Rettig said.
So it’s been a grind on every side, especially with tax filing and payment deadlines pushed back in 2020 and again in 2021.
The deadline was pushed to July 15 in 2020. Last year, officials pushed the deadline to May 17 after important tax provisions became law in the heart of the season. Tolleth called the July 2020 dash to communicate with clients and file their taxes were “the worst two-week period of my career.”
Then extensions came through Oct. 15, 2020. Then last year’s tax season started, and then more extensions. And after a short respite it’s back to another filing season, which kicked off Jan. 24.
“Many people are saying, ‘I haven’t even really finished up last tax season. I never got a chance to decompress before we start again,’” Tolleth said.