Death and Taxes: Make Sure Your Firm Survives Tax Season

Benjamin Franklin said it first: the only certain things in life are death and taxes. In the case of accountants, though, he might have mentioned that the greatest risk is death during tax season.

Forget about last minute changes to the tax code. Forget software updates, and clients without proper receipts, and identity theft, and problems with the IRS electronic filing system. The biggest threat you may face during any tax season is when the owner and majority partner of the firm stops speaking in the middle of a sentence, looks slightly confused, and them drops dead in front of a client.

And while no one seems to be keeping statistics on how often this happens, I’ll bet a paycheck that it is much more common than we like to talk about. After all, the life of an accounting or tax professional is typically one of stress, eye stress, sedentary lifestyle, bad food, caffeine and cola, tobacco, aspirin and long hours. During tax season, all of these are multiplied. One hapless tax professional was so candid about how bad his life is during tax season that he admitted to not having sex from New Years to Earth Day.

This year’s coming tax season will be worse than most, because no matter who wins what election on November 4, the profession is going to be hit by retroactive changes to the tax law in the middle of the season. Count on it.

It doesn’t even have to be a heart attack. The truth is that even for those who exercise regularly, watch their diet, take vacations, and otherwise believe they are prepared face the risk. But at the moment the catastrophe occurs, you will discover that the one thing you are not prepared for is the loss of the firm’s founder and/or leader in the midst of your busiest time of year.

So now, with the Form 990s filed for all of your non-profits and preparations underway for the coming tax season, it’s time to prepare for the months ahead. Time to reconsider your software, upgrade your hardware, get your backup systems and staffing in order.

And then do five more things to ensure that that the firm survives tax season:

  1. Check your firm’s health insurance plan, your long-term disability plan, life insurance plans and key-person insurance plan. The key person insurance insures the firm against the loss of one of its important employees, and usually covers all of the senior staff. Make sure the insurance plans cover rehabilitative services and preventive services. And a dental plan would be good – it is amazing how many heart problems begin as a tooth or gum infection.
  1. Take the tests. Now. I don’t know of anyone who enjoys a cardiac stress test, colonoscopy, barium x-ray or liver biopsy. But the reality is that these and other tests become part of the routine for executives over the age of 50. Avoiding them just puts the firm closer to a major loss. Now, when things are calm before the busy season, is when to get them done.
  1. Do a real succession plan. I know what your current succession plan looks like. It either calls for the key partner to live to 150 and come in to work two days a week. Or it reads like a passage from the Old Testament – “Lament and Pray.” Neither will be of much value when the event actually happens. Know who will take control of the firm so that it is done smoothly. How the news will be communicated to clients. Prepare an obituary paragraph for each key person. Do everything in advance that can be done in advance, including checking that each key partner or firm members has funeral plans already in place.
  1. Get the right technology in place. Suppose the key partner doesn’t die, but has to be hospitalized and can still work? Has the firm invested in a laptop and cell phone that will make that possible? Have you check to see if the hospital you would use has Wi-Fi? Does the office system have remote computer access? Is the partner’s contact management system up to date?
  1. Share the Plan. Because we like to pretend that our top people will never retire or die – that things will always be exactly the same as they are today – succession plans and preparations are generally kept secret. Very, very secret. All this means is that if the founding partner and the designated successor are the only two people in the car when it goes over the cliff, no one else will ever know what the plan was. A good founder has no more than 35 years at the helm of their own company when it matters. Make sure that everyone in the firm knows who will succeed, and let them know if the plan changes.

As a consultant, I like to give my clients a simple rule about starting and operating a business. Particularly a small business. The rule is that you should never get into a new venture without knowing how you will get out.

Even if “getting out” refers to being carried out in a pine box.