Last December’s Tax Cuts and Jobs Act was the biggest change in tax administration in a generation, so it’s only natural that there would be issues with its implementation. So which problems loom first and biggest with tax preparers?
The biggest problem that enrolled agent Twila Midwood at Advanced Tax Centre in Rockledge, Fla., has had so far with tax reform? “Understanding its complexities without proper regulations for guidance,” she said. “This makes it virtually impossible to offer meaningful tax planning for our clients and those who are starting new businesses.”
“It’s difficult to offer planning with so many unanswered questions,” said Phyllis Jo Kubey, an EA in New York. “Section 199A and some of the international compliance issues are among the most difficult areas I struggle with in my practice. Again, it’s not only federal guidance but also how the various states are responding to the federal tax changes. Some states have decoupled, but in many cases we don’t yet know how that decoupling will manifest. ‘Stay tuned’ is a phrase I’m frequently using.”
“The lack of guidance,” said EA Nayo Carter-Gray, of 1st Step Accounting in Towson, Md. “This law is so big and was passed so swiftly that the IRS hasn’t had an opportunity to share documentation on how some of the new credits will actually fall on the tax return. This leads to all type of speculation and guesstimating when I’m creating tax plans for clients.”
The Tax Cuts and Jobs Act, signed into law.
Bloomberg News
‘Very little time’
Nurturing true and comprehensive client understanding of reform is a challenge, said Laurie Ziegler at Sass Accounting in Saukville, Wis.: “Trying to have our clients really understand the changes that have been made and how they will be impacted by them. For example, if you tell someone that there are no more miscellaneous deductions, including non-reimbursed employee expenses, they focus on that even though they may be better off in the long run,” Ziegler said.
Everybody knows how patient clients can be. “Clients wanting to know now what’s going to happen with their return in 2019,” is a major issue for Andrew Piernock, at Piernock Accounting and Tax Services in Philadelphia. “Another issue is waiting for some clarification from the IRS regarding some business issues. We need to know now so we can advise our clients and do some tax planning instead of waiting until December.”
Congress swiftly greenlit the TCJA a mere few days before last Christmas. The timing and speed of the passage surprised many – including preparers.
“We have very little time to do any planning or make any adjustments to our tax game plan for clients for the current year,” said Bruce Primeau, a CPA at Summit Wealth Advocates, in Prior Lake, Minn. “In terms of the most recent legislation that was passed that impacts 2018, the most frustrating thing is that it’s not permanent, in that it’s due to expire in 2025,” Primeau said. “This type of legislation makes it almost impossible to develop a long-term tax-minimization strategy for clients due to the uncertainty Congress is creating on an ongoing basis.”
“Most of the IRS guidance has been coming out piecemeal, making planning almost impossible,” said Manasa Nadig, an EA at MN Tax and Business Services and a partner at Harris Nadig, in Canton, Mich. “Many of the complicated rules and regulations, especially those surrounding controlled foreign corporations, have honestly been pushed out last-minute. I highly doubt even the most experienced among us have wrapped their heads around it all currently.”
‘Singled out’
Certain aspects of tax prep – from paperwork to niche clients – stand out as needing more attention post-reform, preparers say. “I spent a great deal of time talking about W-4s this year compared with recent years,” said Jeffrey Gentner, an EA in Amherst, N.Y. “I found the new withholding charts to be a bit generous, possibly putting too much money into the weekly paycheck. I advised several clients to make changes, either to their withholding or to take the additional monies and increase their 401(k) or 403(b) contributions.”
“When the extenders appeared on Feb. 5, my firm had already completed about 100 returns – and about 25 of those had to be amended to include the extended items,” Gentner said. “Not something you want to do in the middle of tax season.”
“Providing guidance to my small-business owners as a result of the changes caused by the TCJA has been the biggest problem to date,” said EA John Dundon, president of Taxpayer Advocacy Services in Englewood, Colorado. “On a personal level, the IRC [is] all smoke and mirrors. Elected officials who were at one time fiscally conservative in the blink of an eye shackled our children and grandchildren with previously unimaginable debt levels.”
“Being from California, most of my clients feel like they’ve been singled out for living in a blue state,” said Robert Seltzer, a CPA with Seltzer Business Management in Los Angeles. “Many of my clients have very high property taxes and we also have high state tax rates. Most of my clients will end up paying more after the tax law changes.
“It’s not a problem of compliance, but of fairness,” Seltzer said.