Delayed refunds, due diligence requirements top early-season challenges
Every season brings its own challenges, and tax preparers say that this year’s range from the specific to the general, from the use of technology (both good and bad) to market segments, to increased scrutiny for tax credits.
“It’s going to be the deadline change on partnerships,” said Enrolled Agent Laurie Ziegler at Sass Accounting, in Saukville, Wis. “Last year, half the partnership returns we prepared were between March 15 and April 15. This means that we’ll have to allot enough time to get those returns done sooner, so in all likelihood we won’t have time for as many personal returns prior to March 15.”
Delayed refunds on credits have been one of preparers’ biggest problems this year. “The delay on refunds for clients with the Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax Credit,” said Andrew Stadler, an EA in Terre Haute, Ind. More than 60 percent of Stadler’s clients receive one of these credits, and the perception remains that “taxpayers are not aware of the delay and are expecting their refunds in a few days from filing.”
“New due diligence requirements for the tax credits as they relate to dependents,” added Twila Midwood, an EA at Advanced Tax Centre, in Rockledge, Fla., “and educating clients on a tax professional’s requirements and the potential penalties that failure to exercise due diligence could cost. The sad part is that there are some unscrupulous preparers who won’t (or don’t) adhere to these requirements and make it difficult for those of us who do follow the rules.”
“Thanks to a fellow EA,” preparer Jeffrey Schneider in Port St. Lucie, Fla., has a letter that will go out with engagement letters, “just another one that will go along with my FBAR and ACA letters,” he said. “It asks for [copies of] their birth certificates and Social Security cards. I always asked that of new clients, anyway, but now I’m being more diligent on getting proof that the child lived with the parents claiming these credits. I’m sure that my clients who’ve been with me for several years will balk. Like everything else, it’s ‘Please don’t kill the messenger.’”
Some challenges are old friends. “My biggest challenge this year is, I’m increasing my rates and explaining to my clients why and how complex some of the forms are this year,” said Andrew Piernock, of Piernock Accounting and Tax Services in Philadelphia.
“Hiring competent staff,” is a concern for EA John Dundon of Taxpayer Advocacy Services in Englewood, Colo. “I’m offering increased hourly rates of pay and subsequently raising fees to handle the challenge.”
New potentially lucrative markets offer their own kind of lure – and work. “Marketing to the growing Millennials as they come of age for more complex return filing, such as self-employed business owners, first-time homebuyers and new parents,” said EA Kerry Freeman at Freeman Income Tax Service, Anthem, Ariz. “Much like their Gen X parents before, they’ve been raised with so much more technology and have a misunderstanding of the complexity of the tax system. They often think an app can teach them all they need to prepare a tax return.”
Tech steps back – and forward
Freeman added that she meets Millennials “first and foremost” online on social media, “using Twitter, Facebook and Instagram to raise awareness of taxes and the roadblocks that they’ll confront when using apps or DIY box programs. These young adults are smart,” Freeman said, but “they have a misguided idea that taxes are easy. They aren’t quick to learn from their parent Gen-Xer the peril of DIY software.”
Technology figures in other potential challenges this season. “Many of my clients are remote and usually mailed in all their paperwork in the past. For the past few years, I’ve been slowly transitioning them to use a secure portal to upload and send in their documents,” said EA Manasa Nadig, owner of MN Tax And Business Services and partner at Harris Nadig LLC, in Canton, Mich. “Those who find this difficult still mail stuff in, but many others just attach their documents to an e-mail and send it to me. My biggest challenge has been to educate my clients on cybersecurity, ID theft and the need to use the portal for the exchange of documents that have their Social Security number.”
“The latest IRS scams that have been widely reported have helped me in a backhanded way,” Nadig added. “Now more of my clients are taking me seriously and using the portal.”
Nadig has also spread the word by blogging about ID theft scams and what clients can do to protect themselves. “It also helped my cause and saved me and my clients a ton on postage,” Nadig added.
This season, EA Terri Ryman of Southwest Tax & Accounting, in Elkhart, Kansas, is “finally going paperless. I purchased three Fujitsu scanners, and we’re learning how to scan, save and file documents.” Ryman is also migrating to portal-based document sharing and has beefed up physical office security, from alarms to locking disk drives.
“There will be a lot less paper around if someone breaks into my office,” Ryman added.