Tax teams face significant challenges with K-1 processing, as more than half of this work is compressed into just three months, with the busy season now extending beyond the traditional January-April period into July-October. With manual extraction taking approximately 45 minutes per K-1 and growing complexity from forms like K-3, practitioners need efficient strategies to manage this workload.
Consider implementing an "All But K-1" approach where teams complete all other elements of tax returns on schedule. Create first drafts with the majority of data, using placeholder information based on prior years or estimates for missing K-1s. This allows for more efficient processing when the actual K-1s arrive.
Form a centralized K-1 group with specialized focus and dedicated technologies. This team can scale seasonally and maintain consistent tracking of K-1 status. For appropriate clients, discuss using a cut-off/true-up methodology, filing returns with reasonable estimates and adjusting in the following year.
Standardize your K-1 workflow across these key areas:
Data collection systems should track K-1s received in fragments between February and October. Extract data comprehensively to minimize reviewers needing to revisit documents. Validate all tax elements and follow up on incomplete information immediately upon receipt.
Review K-1s in batches to understand cumulative federal, state, and international filing impacts, rather than waiting until all are received. Finally, integrate K-1 data seamlessly with other tax information in your preparation software.
AI-powered tools can extract K-1 data in seconds rather than minutes. Look for solutions that provide automated extraction, intelligent routing of data elements, validation checks highlighting exceptions, aggregation tools for holistic views of filing requirements, and direct integration with major tax preparation software.
Implementation Strategy
With K-1 volume expected to increase substantially in coming years, implementing these strategies now can significantly improve efficiency. Focus on incremental improvements with executive sponsorship and clear communication about process changes.
By aligning people, processes, and technology specifically around K-1 management, practitioners can transform this overwhelming aspect of tax practice into a streamlined workflow that enhances both efficiency and accuracy while reducing the last-minute fire drills that often blow budgets in the final hours of engagements.
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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