Why you need to act fast in tax season 2024

When we brought together a team to talk about predictions for last year's tax season, they were worried about:

  1. Staffing shortages
  2. Connecting with customers quickly
  3. Lower refunds

Home Depot has had its Halloween decorations out since August, Amazon's holiday toy catalog came out weeks ago, and that means it's time to start thinking about....

Tax season 2024!

At this point, this year has a lot in common with last year, but there are a few big wrinkles that are going to impact debt repayment's biggest time of the year.

What's staying the same:

  1. Staffing shortages are here to stay. Unemployment in September was at 3.8, which is marginally higher than it has been, but not big enough to make a real impact.
  2. It's still vital to get to customers first. As Matthew Maloney of FFAM 360 said last year:
"Collections is all about strategy, strategy, strategy. Every consumer out there, particularly the debtors or the consumers that we're collecting from, have a finite amount of income. So part of the strategy has always been in tax season, ‘Can I be one of the first ones to get to that customer?’ Because on average they may have six other debts that they owe that are in collection, and that’s where strategy comes in."

What will look different

  1. Refunds will come in faster due to changes in filing. The IRS has announced that all major individual tax forms will be available for filing online in January, which could deliver refunds four weeks faster.

    And residents in 13 states will be able to participate in a pilot of the IRS' Direct File, cutting out the middleman of companies like TurboTax and Tax act, an additional incentive for people to file electronically.
  2. Student loan payments will squeeze borrowers. While JP Morgan's recent report indicates the resumption of federal student loan repayments hasn't had a catastrophic negative impact on the economy as a whole, that doesn't mean it's not affecting individual borrowers' bank accounts, especially since we know credit card and auto delinquencies have surpassed pre-pandemic levels.

    Collections teams should be prepared to understand taxpayers may want to apply their refund to federal student loans, which are subject to actions like wage garnishment, and be prepared to strategize to get a piece of that budget.

    In addition, residents of four states (and maybe a 5th - Arkansas has yet to decide) who have had their student loans forgiven will still have to pay taxes on that relief, which may be an unexpected bill for them.

How to get ahead

Matt's statement about getting to customers first is going to be even more important in 2024.

With refunds coming in earlier for customers who file online and a tight budgets due to the resumption of student loans and inflation, your team will need to be prepared to start reaching out even earlier.

That means:

  • Hiring, if possible.
  • Investing in technology to decrease new agent ramp time and streamline time-consuming workflows such as QA.
  • Creating payment plans and scripts for situations that recognize increased delinquencies and student loan payments.
  • Segmenting and prioritizing accounts as soon as the IRS opens the returns window in late January.

And being prepared to move fast with all of it.