One change at the IRS could be a huge win for CPAs
Most CPAs agreed — this year was the worst tax season in memory.
Tax reform created new rules and regulations that were unfamiliar at best, and often poorly thought out, inconsistent and confusing. In addition, CPAs had to deliver a lot of bad news to their clients. Even though tax reform provided relief to some, it generally wasn’t felt that way. Many people were paying less in taxes over the course of 2018 — incrementally fewer dollars in withholdings — yet faced a tax bill or were looking at a much smaller refund when it was time to file. It was a reality check, and many taxpayers had ended up owing money for the first time. The withholding guidance, in some cases, proved to be too aggressive, ultimately rocking the expectations of many people accustomed to receiving refunds.
As CPAs struggled to keep up, they looked to the Internal Revenue Service for assistance. Instead, the agency was part of the problem. In a time of tremendous change and confusion, the IRS remains woefully understaffed and underfunded, and was overwhelmed with requests for clarification on many new tax treatments. In many cases, taking an extension was the only way to go — several new provisions required more information than was available for filing time.
The agency, to its credit, kept pumping out information to stay on top of the myriad and often highly technical changes to the law, and has been more active in engaging with the tax community with regional meetings and other communication. That said, the IRS still has a long way to go to upgrade and reorganize. This year, the IRS still employed the “courtesy disconnect,” which means that after being on hold for hours, in some reported instances, they disconnect the call, perhaps to spare any more pain of waiting.
Providing taxpayers access to the information they need to file a complete and accurate return is the single biggest factor in increasing both compliance and tax revenue – more than audits, more than collection activities. If there’s one clear takeaway from tax reform, it’s the need to modernize how the IRS interacts with both professionals in the tax industry and the public.
The IRS is beginning to embrace the need to modernize, and in fact, it recently announced its IRS Integrated Modernization Business Plan. The plan is loaded with complicated, long-term, expensive but necessary steps. Missing from the plan is a simple, cost-effective and potentially very effective change — the creation of a Practitioner Services Division, which would, among several improvements, provide a secure online portal for tax practitioners to access all clients’ information to facilitate the flow of taxpayer data. IRS Commissioner Charles Rettig recently said he understands the need for such a division, spreading some hope for CPAs everywhere.
Current practitioner services are fragmented and inefficient. Each practitioner represents hundreds if not thousands of taxpayers, and time spent educating practitioners and solving their problems in a holistic and complete way has exponential ripple effects throughout the taxpaying community. A consolidated Practitioner Services Division is the right direction to achieve this goal.
Next tax season promises to be better. Practitioners are now wiser by one crucial year, and so, too, are clients. You can bet withholding tables will receive extra scrutiny. But it remains for Congress to recognize the potential of the IRS, and the valuable return on investment in funding the agency at appropriate levels, and it remains for the IRS to make a simple change that will not only benefit practitioners, but also the millions of taxpayers they serve.