THE GOP TAX ACT AND THE TAX PREPARATION INDUSTRY

The tax filing season is off to a relatively slow start, as usual.  As I receive returns in the mail I am getting them out, with only a 1-day turnaround.  So, I have some time to comment on this topic.

My fellow tax blogger Jason Dinesen has posted his thoughts on how the GOP Tax Act will affect tax preparers in “How Will the New Tax Law Affect the Preparer Industry” at DINESEN TAX TIMES.

I do agree for the most part with his comments on “What I Think Will Happen”.  Any tax law change, good, bad or indifferent, results in increased business.  So, 2017 and 2018 will see an increase in the use of paid tax preparers.  However, I agree that what follows, at least until 2025, will be a drop in basic 1040 and Schedule A clients.

However, the increased complexity of the new Section 199a deduction will most definitely increase business from self-employed taxpayers, be they Schedule C filers, partners, or owners of closely-held corporations.  This will more than make up for the loss of itemizers.  And the complexity of having 2 separate tax rate schedules for investors who benefit from the lower qualified dividend and capital gain rates will keep investors in “the fold” and perhaps add new ones.  So, tax preparers will lose clients on the lower-end of the fee schedule and gain clients on the higher-end.  And existing business clients will be paying higher fees for the increased complexity and calculations.

So, the bottom line is that the tax preparation industry in general will benefit from the new Act.  How it will affect the industry is that preparers will need to increase their continuing education and training in the area of business returns – sole proprietorships, partnerships, “regular” and sub-S corporations – and become conversant with Section 199a, and focus their practice development efforts on these self-employed taxpayers.

I do still think there is a market for the returns of those who cannot itemize.  I have always said I would make more money, have less GD extensions, reduce the potential for error, and experience much less agita and aggravation if I did nothing but 1040A returns all day during the tax season.  Preparers will need to be aware of pricing issues, and keep their fees for these simpler returns reasonable.

From a personal standpoint, the GOP Tax Act will not affect my 1040 practice one iota.  None of my clients will leave me to prepare their own returns due to increased simplicity.  I do not accept any new clients, period, and am actually attempting to “thin the herd” as I head toward retirement after 4 more filing seasons (once I can say I have been preparing 1040s for 50 tax seasons).  I am actually somewhat pleased that the Act will actually reduce the complexity, and potential for agita, of the returns for many of my clients (I have truly minimal business clients).   

So, what are your thoughts on the subject.  Will the GOP Tax Act help or hurt your practice?

TAFN

BACK ON THE SOAPBOX

It seems to me that the underlying reason for the existence of any labor or trade union, or professional membership organization like the AICPA, is to get as many benefits as possible, financial and otherwise, for, and lobby to protect, its membership – regardless of whether or not the benefits and lobbying are appropriate, or whether or not providing the benefits, or what they lobby for, does harm or damage, financial or otherwise, to any other party or parties.  Their existence is purely selfish in nature– as I guess it should be.

For example, the actions and lobbying of the AICPA is solely for the purpose of lining the pockets of, and reducing competition for, their CPA members.  They don’t care if what they lobby for is morally or ethically “correct” or “appropriate”, or if what they want comes at the expense of, or does harm to, non-CPA groups and individuals.  They are not interested in proper tax administration, or what is in the best interests of individual and taxpayers.  They only care what is in the best interests of CPAs, and act accordingly.

Case in point – the AICPA opposes anything that gives additional credibility to Enrolled Agents or to “unenrolled” tax preparers.  If they oppose tax preparer regulation it is because they do not want taxpayers to think non-CPA preparers who receive IRS “approval” or credentials are as good as, or closer to reality better than, CPA tax preparers.  They think they “own” the tax preparation profession and want to keep it that way.  When they do support any regulation of preparers they expect to be exempt from its requirements.

While Enrolled Agents do have the National Association of Enrolled Agents to promote and protect members, and lobby on the behalf of members, more ethically and appropriately than the AICPA, “unenrolled” preparers do not have an equivalent of AICPA or NAEA. 

There is NATP and NSTP – but these organizations are geared more for providing quality education and resources for members.  While they do speak to legislation and IRS issues occasionally on a basic level, and do promote their members, they do NOT act affirmatively to protect members via aggressive lobbying against legislation and government rules and regulations that adversely affect members.

Unenrolled tax preparers, or more to point non-CPA members of the tax preparation industry, truly need a loud and aggressive voice in Washington

But I see a lobbying organization for tax preparers representing the interests of ALL preparers - EAs, the “unenrolled” and CPAs, actually all PTIN-holders - and dealing with the concerns that are common to all preparers.  Unlike the AICPA, this organization would not attempt to portray that one class of preparer – the unenrolled and/or the Enrolled Agent – is “more better” than another – the CPA.  The competence and appropriateness of a tax preparer should be determined and judged on the combination of the specific qualities and qualifications – knowledge, training, experience, remaining current, pricing and practices - of the individual preparer. 

Its purpose would NOT be to promote tax preparers, or one class of tax preparer, in the eyes of the public, but to protect ALL tax return preparers from the imposition of excessive and inappropriate rules and regulations by Congress and the IRS.

Your thoughts?

TAFN