Tax Day and Leveling

So it’s almost tax day, April 17th this year. In a way, it’s an ultimate batch process, everybody having their returns due the same day during the year. That’s over 135 million tax returns. All at once.

It probably wouldn’t be fair to do it any other way, but it sure does create seasonal demand spikes for tax prep services, companies who have to prep tax documents after the start of the year, and the IRS having to process them. Oh yes, and the USPS having to transport all of those returns.

The one thing that helps level this IRS workload out… the tax refund. 4 out of 5 taxpayers will get a refund this year, which creates a built-in incentive to file as early as possible, so you get that refund earlier. Let’s ignore, for now, that getting a refund is economically non-ideal, as you’ve given an interest-free loan to the government.

If everybody had to write a check, instead of getting a refund, everybody who was smart would write that check and mail it on the last possible day.

So why are the post offices so crowded up until midnight on tax day? I guess we really are procrastinators.

Other stats, things that you could argue help “lean out” the process (reducing waste of paper, transportation, or waiting) include electronic filing (65% in 2004) and electronic direct deposit of refunds into bank accounts.

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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3 Comments on "Tax Day and Leveling"

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  1. Jamie Flinchbaugh says:

    My comments might not have anything to do with lean here, but they do have to do with taxes and behavioral economics. I’ll propose an alternative to the view that you don’t want to give the goverment a loan. I completely agree IF (a) you manage every last cent of cash float you have to maximize your interest income and (b) interest rates on cash are remotely attractive. B is getting better, but I would argue 99.9% of folks do not do A. So, if you overpay your taxes and get a check back, you then have only ONE decision to make: what’s the right thing to do with this money? The alternative is that it shows up a little bit in each paycheck and you have to make 26 or 52 decisions to do the right thing with your money. It is more likely that it gets spent. So rationally, you should not give a loan to the government. But behaviorally, it can help you save to give a little extra and then get a check back. Like I said, nothing to do with lean, but something to think about anyway.

  2. Mike Lopez says:

    Hi Jamie. I’ve got to disagree with you here. You have to make 26 or 52 decisions about what to do with your money anyway. The extra few bucks in each paycheck is not a new decision. That money is simply incorporated in your already existing biweekly or monthly decision. By paying too much money to the government, you are adding a decision to your yearly schedule. I would propose that getting a check back is not only repayment of an interest free loan, but also a waste of your decision making time.

    To reduce the waste associated with all those decisions, you could try doing auto-bill pay, auto-investing, and auto-saving. All these services are available on the Internet. Then, you make the decision once, program the services, and sit back as your money moves by itself every month.

  3. Mark Graban says:

    I saw an item in the news today that over 9 million people were asking for an extension in filing. That’s up significantly over the past few years. At least that helps level load things fo the IRS.

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