In the face of major uncertainty regarding the upcoming tax season, Jeff Gramlich, president of tax software developer CCH Small Firm Services, is urging tax preparers to get in touch and stay in touch with their clients.
With Congress and the Obama administration apparently unable to reach a deal over the fiscal cliff and a wide variety of unresolved issues in tax legislation, “What preparers need to do with John Q. Public is to send them e-mails and communicate with them to show how it will affect them personally,” Gramlich said in an interview. “A lot of people don’t like to think about their tax situation until it’s tax time. They may or may not understand the consequences going back and forth between Congress and the White House — hence the need to keep communicating. You need to personalize it. When they get an e-mail from their accountant or tax preparer explaining what the fiscal cliff means for them, they might open it up and read it.”
It’s a strategy CCH SFS plans to follow, as well: “This year, more than a normal year, it’s communicate, communicate, communicate,” Gramlich said. “We’ve started a series of e-mails; we’ve taped a video session with me and we’ll do another one in January. We also created a Fiscal Cliff Resource Center for our customers to go out and grab information to learn how it will affect them.”
The Fiscal Cliff Resource Center includes a wide range of white papers, articles and videos explaining the cliff and its potential impact on tax preparers and taxpayers. The company has also sent out letters to its customers to keep them up to date on the latest in Washington negotiations and legislative changes, and how they’ll affect the upcoming tax season.
The Filing This Time
At the moment, the shape of next tax season is highly uncertain, due to Washington’s inability to resolve the fiscal cliff debate. “We were hoping to know [on Friday], but now it looks like we won’t know anything earlier than next Wednesday, post-Christmas,” Gramlich said. “We could quickly get to the end of the year without any movement.”
“The big thing impacting individuals is the Alternative Minimum Tax patch, and if they don’t agree on the patch we revert to the pre-Bush era amount,” he explained, which could potentially affect more than 30 million taxpayers.
“If I were a preparer, I’d be looking at that. That’s the one thing they have to agree on. This could end up being like 2010, where we agree to disagree and just extend everything,” he said. “From what we’ve heard from the IRS, the season is still going to start as planned -- January 7 for business returns, and January 22 for individual e-file returns. But if the IRS has to go back and reprogram around this patch, it’s going to seriously delay those returns.” It’s impossible to say how long that delay might last, Gramlich said, but “I’ve heard mid-March -- we hope they’re quicker, but they’re not going to process those before March.”
However, he pointed out that no matter how late the season starts, the IRS will not push back the April 15 final filing date.
With that in mind, he suggested the preparers get ready to perform a type of triage on their customers: “As a preparer, I’d look to prioritizing my return set based on my client base, to figure out which ones I can complete, and maybe pushing back those who are going to be or might be in the AMT.”
Should the season be significantly delayed, the IRS will be doing something similar, he said: “Behind the scenes, they’ll ask some of the major players how many returns we’ll send at one time. They will ask the three or four big ones to stagger their returns when they submit. They’ll say, ‘We can handle millions a day, but can we handle tens of millions a day?’”
In addition to closely following legislative change in Washington, and keeping in close contact with the IRS, CCH SFS is also working on a number of state initiatives to keep its customers up to date on changes at that level.
The company will also continue to update the materials in its Fiscal Cliff Resource Center, and in the Marketing Resource Center it created earlier this year to help tax preparers market themselves.
“We’ve also significantly increased our number of customer service reps,” Gramlich said. “So we’ll have more people on the phone for whenever the bubble of transactions occurs.”
They’ll also continue to work closely with the IRS. “We’re always looking at their real-time tax system, with more and more verifications up front, and we’re trying to help with that -- real-time matching of source documents with what’s on the return. The IRS is making progress on that.”
Looking beyond tax season, Gramlich sees still other issues to work on. “Later on in the year, we’re going to need to talk about the health care reform act, and what exactly does it mean. We’re on those committees and staying in touch with that, and the IRS has really reached out to the IT community on all those, and on real-time matching and preventing fraud, and to help them work through the impact of health care reform on a go-forward basis.”