THE TAX PROFESSIONAL

Subtitle

ANSWERS


I received several responses to my questions from the May 26 post about the effect of the relatively new excessive due diligence requirements for tax professionals who prepare returns claiming the Earned Income Tax Credit.  I have published some of the responses on the MAILBAG Page.

 

It seems that these requirements, like the new requirements imposed by Obamacare, are not as bad as originally expected – but still an unnecessary time-consuming inconvenience. 

 

And I also discovered something else that I believe is wide-spread among legitimate tax professionals – despite the additional work involved with EITC claims, preparers (other than the fast food chains) are not increasing their fees accordingly (to properly reflect the additional time involved).  This is mostly because the clients who are claiming the EITC are, by definition, low-income individuals who really cannot afford the increase, and, as one respondent put it -

 

If I were to raise fees I would lose those few EITC clients I have and their referral sources.”

 

So the bottom line is that tax professionals are being forced to do extra work, under threat of excessive penalties - to, in effect, become Social Workers – for which they are not collecting fees commensurate with the additional work involved.  

 

All the more reason that the tax preparation industry needs a unified voice in Washington to lobby the IRS and Congress against excessive and inappropriate burdens.  Check out my November 2013 editorial “Who Speaks for the Tax Preparer?” at TAXPRO TODAY.

 

Not surprising, the respondents to my EITC questions agree with me that this credit – a form of federal welfare – does not belong in the US Tax Code.

 

 

IS THERE ANYTHING SACRED ABOUT APRIL 15th?

 

A fellow tax professional recently responded to a post I made to the NJ-NATP Facebook Group with a question and a proposal that has been made several times over years.

 

Is there something sacred about April 15th?

 

As it stands now probably most of us have about two months to do returns. As you stated probably really get going mid-February. So, I would propose a new deadline filing date to May 15, or May 31 for that matter.

 

This will kill two birds with one stone. It will give preparers and taxpayers sufficient time for accurate preparation and the other benefit would allow the IRS to concentrate more on fraudulent returns which have gotten out of control.

 

Just think about it for a minute. On our end we are rushed to get returns submitted and the IRS is in a rush to get returns processed. So, with little time for anything else the frauds are discovered too late. I have always felt that the filing period is too short for the amount of returns filed in the country.”

 

I have mixed feelings about extending the April 15th tax filing deadline (which was originally March 15th – but before my time).

 

I work on average about 11 hours per day, 7 days a week from February 1st through April 14th (although perhaps not 11 hours a day during the first week of February).  To be perfectly honest I personally would not, both physically and mentally, be able to continue that pace for another 30 – 45 days.

 

However, in my case (I no longer accept any new clients) if the season were extended I would not have to work 11 hour days – as the work would be spread over a longer period. 

 

Extending the season would not be necessary to increase IRS scrutiny of returns.  April 15th is the deadline for taxpayers to submit returns – but not for the IRS to process returns.  The IRS does need to do more to reduce the amount of fraudulent refund checks issued – but in my opinion time is not the main problem.  They need to develop new protocols for assessing the data.  Some possible solutions are discussed here and here (see Bill’s discussion of “real-time notifications from the IRS of actions performed by a taxpayer” at the end of the post).  Perhaps it would take a week longer to process returns – an appropriate trade off.  But, again, this would not require extending the actual filing deadline.

 

And procrastinators will always be procrastinators.  If the filing deadline was May 15 or 30, some taxpayer clients would still wait until the last minute to get their “stuff” together – resulting in GD extensions.   

 

I do believe the answer lies in brokerage and mutual fund houses being forced, under threat of penalty, to get their act together and create the software necessary to be able to generate correct reports by January 31st, or even by February 15th, but without the need to issue corrected reports a month or more later.  And I do believe that the filing deadline for partnerships should be March 15th.

 

One of the “attractions” of the tax preparation profession, at least for me back in the early 1970s (and still today) was the extensive 2½ month duration of the filing season.  

 

So my vote would be to keep the initial filing deadline as it is. There is something sacred about April 15th.

 

What do you think about the idea?



TAXPRO BUZZ


+ The NATIONAL SOCIETY OF ACCOUNTANTS (the other NSA) has announced “Registration Open for Spring 2015 ACAT Tax and Accounting Accreditation Exams” -


Registration is now open for the Accreditation Council for Accountancy and Taxation® (ACAT) Spring 2015 exams for accountants, tax preparers and students seeking to earn the Accredited Business Accountant/Advisor (ABA), Accredited Tax Advisor (ATA), Accredited Tax Preparer (ATP) and Accredited Retirement Advisor (ARA) credentials.”

 

The ATP and ATA designations are probably the only valid non-government-administered voluntary tax preparation credentials – similar in some ways to the Treasury Department sponsored EA (Enrolled Agent) designation.

 

For information on the ATP and ATA designations read my coverage of “Alphabet Soup”.

 

+ Roger Russell of ACCOUNTING TODAY interviewed several large tax firms to find an answer to a questions I asked, and answered, here at THE TAX PROFESSIONAL in my May 12th post - WAS THE TAX FILING SEASON AS BAD AS PREDICTED?  The result is the article “Lessons Learned from Tax Season”.

 

Several respondents discussed the problem of late corrected consolidated 1099 statements from brokerage houses, which I recently discussed over at THE WANDERING TAX PRO in “What A Disruptive Development This is”.  However this problem has been around for a decade now, so it is not unique to the 2015 filing season.

 

What I found interesting in the article appeared at the very end.  At a debriefing session after the tax season was over a respondent asked his staff to complete the sentence “Tax season is like…”.  Seven out of the 50 at the meeting came up with the same response –

 

Tax season is like childbirth. There’s a lot of pain as you’re going through it but at the end you feel great joy and accomplishment.”

 

I have never gone through childbirth – but I do not think of the tax season as being that painful.  Sometimes, however, depending on the client, it can be like pulling teeth.