Preparer Productivity for 1040 returns

[Philip1117]

For those of you who hire preparers during the tax season what standard do you use to determine how many returns that person should complete in a season?

 

For example if your business is mostly 1040 returns that are dropped off  what would your expectation be as to the number of returns a person can complete? 

 

Model 1: The person would input, print, assemble and deliver the return to the client with a personal review.  Same person all the way through.  Say 1 per hour so that's 400 in a season.

 

Model 2: Have different people for each step in the process.  Intake, Inputter, Print and Assembler, Deliverer.  Four people so this team would have to do 1600 returns.

 

Which model to do you use? 

 

How do you determine how many 1040 returns a person should complete? 

 

If its non 1040 work what is your time allowance for these returns?  How many hours for S crop,  C corp,  Partnership, Difficult schedule C,

 

 

Phil

[Jack from Ohio]

If every tax return was exactly the same, your question could have a valid answer. Given the reality of our world, an accurate answer to your question is not possible.

I prefer a knowledgeable, precise and ethical person to a fast person.

[Philip1117]

Its a business you must have some standard to determine if an employee is performing to expectations.  If its not time based it has to be based on something.  If its cost to revenue what is your multiplier.  The knowledgeable and ethical parts are a given. 

 

If you have two employees doing similair work for similiar pay and one does half as much as the other what do you think is likely to happen?

 

Phil

[Jack from Ohio]

Its a business you must have some standard to determine if an employee is performing to expectations.  If its not time based it has to be based on something.  If its cost to revenue what is your multiplier.  The knowledgeable and ethical parts are a given. 

 

If you have two employees doing similair work for similiar pay and one does half as much as the other what do you think is likely to happen?

 

Phil

In a world where no two tax returns are the same, please define for me "half as much work as the other?"

[norcalea]

 Ill take the preparer whose work is thorough and error free, even if they produce half the quantity of returns as the other. 

[Philip1117]

No such thing as error free.  You have a standard, you're just not sure how to articulate it.  So lets see if we can define your minimum standard. Lets all agree that quality work is a minimum requirement.  Fast and error reduced are not mutually exclusive terms.  Half as much work is defined as half the revenue produced from the effort expended.

 

1.  You pay your staff more money than you make. 

2,  You pay your staff what you make.

3.  You pay your staff less than you make.

 

If number three then you do have a ratio that can be used to evaluate productivity.

 

My number is 3.  I want to make at least 3x what i pay my staff member for the work they complete. 

[Lion EA]

Then build your ratio around your pricing.  You'll be able to get the exact ratio you want.

[Lee B]

Pay based on a percentage of the gross fee. That way you won't be penalized for someone who is very accurate but slower.

 

You still have to keep track of their hours and pay at least minimum  wage. If you have someone who is very fast but makes more mistakes, then they won't receive any additional compensation for fixing the mistakes.

[Philip1117]

Good feedback but what is your ratio?

[Jack from Ohio]

I/we have never computed such a number. More items are far more important. The last 10 years, at the firm, 30,000+ returns, 5 total audits for returns that we prepared.

Preparing returns is different than a factory production line. I have a higher regard for our business than that. Therefore, ratio, and all the other indicators I see used in this kind of discussion seem to trivialize my profession.

These discussions feel like the method the big box stores use with their "customers."

I have clients, not customers. There is a difference, and I will ALWAYS have clients instead of customers.

[kcjenkins]

If its non 1040 work what is your time allowance for these returns?  How many hours for S crop,  C corp,  Partnership, Difficult schedule C,

 

 

I agree with Jack on this part.

 

If every tax return was exactly the same, your question could have a valid answer. Given the reality of our world, an accurate answer to your question is not possible.

No two Sch C's are the same, ditto Corps and Partnerships and LLC's.  The time is going to depend mostly on how complete and how well organized the records the client provides are, plus # of partners/members, etc.   

 

Even 1040's can vary widely.   Say four returns, all 1040's, and say 3 W-2s each.  But Taxpayer A has education credits, interest income, and a 2106.  Taxpayer B has a Sch B, a Sch D and a retirement plan rollover and RMD calculation.  Taxpayer C has Sch A, with 6 non-cash contributions, significant medical expenses, and they refi-ed  their home mortgage.  Taxpayer D has nothing but those W-2s and a little UI.  Are you going to pay the preparers the same for each of those?  Or expect each to take about the same time?

[Philip1117]

Jack,

 

Simply take the number of preparers/total returns and you have your productivity number.  What is it? 

Take your total payroll cost/Gross revenue and you get your cost multiplier. What is it?

 

Don't want to share just say so.

 

Phil

[SaraEA]

I agree with Jack and KC.  Tax returns and taxpayers are too varied to come up with an average time or cost.  You can have two clients with Sch Cs, one with all receipts neatly summarized, another with a shopping bag full of every piece of mail that looks financial he got all year, including birthday cards and the life insurance bill he threw in the bag instead of paid.  Of course you charge the shopping bag guy a lot more because it takes so long to organize his mess.  You still end up with two Sch Cs, so an average makes no sense.

 

Then there are the clients you have to chase for missing info.  Some of these people are missing half their tax data, and they piecemeal it to you so you never know where you are in the return.  Others are missing something simple like their car taxes and get the number to you the next day (or two months later).  The preparer not only has to input the data but be thorough enough to know what's not there and communicate with the client.  Takes time, but again the fees will reflect that.

 

At the chains the model is pretty much to get every client in and out in an hour or less.  I wonder how often things like car taxes are ignored because the client doesn't have them with him or her and no one wants to put a return on hold.  In a professional practice, it can take a whole season to determine how much an employee brings in per hour.  Some days I put more returns on hold than I complete--looks like I didn't cover my pay.  Then one day a dozen clients provide that last bit of info and I collect thousands.  Again, averages don't work.

 

Perhaps instead of calculating ratios and averages, you should offer a reasonable hourly rate.  If you only have a only few employees it won't take long to see who is earning their keep and who is texting all day.  Remember too that experience with each client's quirks will help to speed things up in the future.  I have a couple of shopping bag clients who used to take me hours to sort and categorize.  Now that I know them and what to expect in those bags, I can separate the wheat from the chaff in no time.

[Jack from Ohio]

Jack,

 

Simply take the number of preparers/total returns and you have your productivity number.  What is it? 

Take your total payroll cost/Gross revenue and you get your cost multiplier. What is it?

 

Don't want to share just say so.

 

Phil

Why? We do not even think about those things. We have clients. Not assembly line tax return preparation.

[MsTabbyKats]

OP

Sounds like you run an H&R....or JH.....where the customers come in for simple returns and big refunds. You don't build relationships...you focus on turnover.

This isn't what most of us are about. I do everything myself. Some of my more complex returns are quicker than some of the simple ones, where I have to do explaining and/or hand holding. That's because I focus on the person and what that person needs. I don't want the "one shot" deals.

[Lion EA]

You can follow the big box stores and pay a percentage of the bills as a bonus after deducting the amount you already paid during the season.  You can adjust as necessary so you get your requested 3X what your preparers get.  YOU have the info you need to create your multipliers for next season.  WE don't treat our employees that way.

[taxxcpa]

It might be possible to have a rate-per-form that could be used, but some schedules might take five minutes for Client A, but take 30 minutes for client B.  A fixed rate per hour seems more reasonable, but the rate would need to vary based on the ability of the employee.

[MDEA]

I have nine preparers all but one part time. I pay them $11.00 per hour plus $10.50 per return.It is more than the JH & liberty. Most of the returns are basic EITC returns. I have had very little turn over in the last 12 years so they must feel it is fair.

[Pacun]

I have nine preparers all but one part time. I pay them $11.00 per hour plus $10.50 per return.It is more than the JH & liberty. Most of the returns are basic EITC returns. I have had very little turn over in the last 12 years so they must feel it is fair.

 

OK, your info might give the ratio Philip is looking for. Would you say that your people spend less that one hour per return on average, while more difficult ones would take a couple of hours, correct? You will not give 10 huge corporation returns to a person in one month because that person might make only make about $12 per hour while someone preparing easy returns will make at least $21.50 per hour, correct?

 

How do you compensate for the PITA factor in clients? Some easy returns can take you a couple of hours just because the client is PITA and keeps bringing, how about my CVS co pay or I bought a brand new car last year, will that help me with my W-2 job?

[Lion EA]

Bill what the return is worth.  Then work out your percentage of billing to meet your requirements.  That way, the time-consuming or more complex or PITA return was billed more; therefore, your employee who dealt with those issues is paid more.

[Jack from Ohio]

I have just come up with a thought on this matter.

 

if it is an absolute requirement that you make 3X what your top preparer is making, lower his/her pay to 1/3 your salary.

 

This will accomplish the requirement you have established as necessary, and will find out if your top preparer was paid too much or not.

 

Chances are you will have to replace them. 

 

I do not understand your need to have your pay based on what one or any of your employees make.  Seems a bit obsessive to me.

 

Additionally, unless you can be three times as productive as your top employee, your requirement would seem a little misguided.  Why not just decide on a salary that you will be happy with, and go on with business. I really am not grasping the need for such a requirement based on an employee's pay vs yours. 

 

Just my opinions, and my rant about this.

[Lee B]

It is legitimate business model that is out there, which I have personally encountered  before.

[Jack from Ohio]

It is legitimate business model that is out there, which I have personally encountered  before.

A poor business model if you have clients instead of customers.

[Philip1117]

I think its funny how you can be judged about the kind of business you run beacuse you ask a basic business question.  I have been accused of running an error prone, client unfriendly business.  I was even accused of being like HRB.  Not sure how thats an insult actually.  If I could bring in 1/100,000,000 of HRB fees I would take it and so would you.

[Pacun]

I think its funny how you can be judged about the kind of business you run beacuse you ask a basic business question.  I have been accused of running an error prone, client unfriendly business.  I was even accused of being like HRB.  Not sure how thats an insult actually.  If I could bring in 1/100,000,000 of HRB fees I would take it and so would you.

 

I guess in an effort to have happy customers we forget that we are running a business. Businesses make money, otherwise you could run VITA, non-profit site and get some money from the IRS because you are running a non-profit tax preparation business.

 

Does any one of us make as close as the president of HRB who doesn't even deal with PITA clients? Why is that? Because they admit they are in business and have marketing strategies. They have ratios, strategies how to get clients to the door, they have strategies on how to pay rent from 3 months of income. Some of us have difficulties paying our rent and we work like dogs most of the year.

 

When I was taking math in college, I had some formulas that apply to a lot of business, but with time I have forgotten them. Now I run my business with the only direction to get 40 more clients each year by being a good counselor and by ignoring that I am in business and that I should not be wasting my time listening to my client's stories while I have other clients whose paper work is on hold because I am a good listener. My production ratio becomes very low, but hey, I don't have a ratio.