The throbbing’s back: Tax pros share this season’s biggest headaches

April 7, 2022 9:00 AM

Every season brings its own special problems. Special seasons bring quite a few problems.

This is turning into yet another exceptionally extra-special filing season. Cue the headaches. Here’s a look at some of this year’s biggest problems and some possible solutions.

Self-inflicted

“My biggest headaches are my own fault,” said Morris Armstrong, an Enrolled Agent and registered investment advisor at Armstrong Financial Strategies in Cheshire, Connecticut, who hired a newbie to help administratively, “put them through a tax course and then let them disappear. They always had an excuse on why they could not do something. I also bought new technology where the learning curve is too steep to put it into place for this year. Fortunately,” he said, “that’s only a monetary loss.”

Like falling off a backlog

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“My biggest headache is dealing with IRS letters requesting returns or taxes for returns already filed, not just paper returns but e-filed 2020 returns which apparently the service hasn’t processed yet,” said Brian Stoner, a CPA in Burbank, California. “If the returns are requested, I’ve had them faxed if there’s a number available or have tried to call and get a fax number since the mail is so unreliable. I have sent some returns Priority so at least I know they got there.”

“This is going to be even worse going forward,” Stoner added. “I got one return request for a paper-filed return where the refund was processed and direct deposited … .”

Past performance is no guarantee of future success

A poster of the Child Tax Credit during a news conference at the U.S. Capitol in Washington, D.C., U.S., on Thursday, July 15, 2021. The President's agenda got a boost with Senate Democratic leaders outlining plans for more than $4 trillion in domestic programs, but enactment hinges on negotiating details on Medicare, taxes, immigration and infrastructure that have confounded Congress for a generation. Photographer: Al Drago/Bloomberg

Al Drago/Bloomberg

“The many changes we have seen with stimulus, the Advanced Child Tax Credit, child and dependent care credits, more refundable credits, new K-2/K-3 requirements, 7203 requirements … they are all having to be explained to the client that may or may not understand the differences from prior years,” said Chris Hardy, an EA and managing director at Georgia-based Paramount Tax and Accounting. “There are also many questions regarding Venmo and PayPal reporting. Each return is taking longer to process and complete.”

Memory issues

“Trying to get clients to help reconcile the EIP3 payments,” said Jeffrey Gentner, an EA at Gentner Tax Associates, in Williamsville, N.Y. “Since many of them received their payments almost a year ago via direct deposit, they simply do not remember. A lot of time is wasted during their tax appointment, searching their bank statements online to see if they received it. I know they most likely received it, but many need to see it for themselves. It continues to amaze me that some clients have forgotten that they received $5,600 for a family of four!”

“Many of my married couples received only one letter, showing half of the EIP3,” Gentner added. “Some clients seem irritated that I’m even asking about the payments received because they know they are not taxable. That leads to an additional discussion.”

‘Doesn’t sink in’

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“The second biggest headache is dealing with the Advance Child Tax Credit payments,” Gentner said. “As the name suggests, it was an advance, yet clients cannot seem to grasp that since they received payments from July to December 2021, their refund may actually be less than expected or they may owe taxes when they usually get a refund. I sent out an e-blast to all my clients in late June about the program and why some might consider opting out of the advance. Sometimes it doesn’t sink in until they see the actual figures on their tax return. This explanation has to be repeated several times a day in my office.”

This, too, shall pass through

“The biggest headache so far this season is the passthrough entity tax that many states have adopted,” said Gail Rosen, a CPA in Martinsville, New Jersey. “Many states are still finalizing the associated forms as the deadline quickly approaches. We have returns in our office ready to be filed and we were just told that some of the last forms we need [wouldn’t be] available on March 10. The deadline was March 15.”

“The states participating all have unique rules as it pertains to the type of income eligible and whether PTE taxes paid are creditable. In addition, the election due dates and processes to make the election are all different,” added Cindy Ostrager, a CPA and partner at Top 100 Firm CohnReznick, in New York. “A client needs to make the election now forward-thinking [and] not knowing how the remainder of the year will play out.”

Two times the fun

A close up of the capital building with an American flag

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“The Employee Refund Credit is one headache — the lack of guidance early on has created a domino effect,” said Ann Etter, a CPA and partner at Goodney & Associates, in Northfield, Minnesota. “The uncertainty of what Congress might do regarding taxes is another. It’s challenging to plan anything when we are unsure which direction tax laws might go for 2022 and beyond.”

Market jitters

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“We’re having the most difficulty with clients making contributions to their IRA accounts,” said Bruce Primeau, a CPA and president of Summit Wealth Advocates, in Prior Lake, Minnesota. “Yes, the contributions need to be in before they file their 2021 tax return or [Tax Day], whichever comes first. The global equity markets have been getting crushed the last several weeks and a few are shying away from wanting to put any money to work. You can’t finalize the 2021 return until the preparer knows for sure what they’re going to do.”

The outlook is bright

“Look on the bright side” is trite, irritating — and perhaps indispensable when working in tax prep right now.

“Rather than moping, I simply move on,” Armstrong said. “I have a great practice for me at the moment, great clients. In the past, I was very lax in enforcing things that I wanted clients to do, and this year, if they did not make the changes, I literally told them to find another person. I dislike the power trip of ‘my way or the highway’ but also realize that this is a business with processes and goals. So, my being a little less accommodating is a good thing.”

“If we do not have a nuclear war,” he said, “I suspect that I’ll survive and thrive this season.”