It never fails – every year we leave tax season confidently claiming that the next one will be better or that it couldn’t possibly be worse! Are we hopelessly optimistic or are we looking brave? There is no doubt that each year presents its own challenges and perhaps romanticizes the distant past, but the past few years have been brutal for tax professionals. Gone are the days when you only asked yourself whether extenders would survive or which new business a customer told us about too late. It has been a constant hurricane of significant tax law changes since at least the Tax Cuts & Jobs Act of 2017 that need to be addressed in addition to these concerns.
Chaos of the 2020 tax season
Despite a late renewal law and major retirement reform, 2020 had hopes of becoming a semi-normal filing season – until Covid hit. The global pandemic was unprecedented in our lives, challenging almost every person and business, and the tax profession could not escape its wrath. While many tax firms and their employees were used to some sort of remote environment and had a technological framework for a quick transition, many paper-based and face-to-face firms made adjustments.
Eventually our industry adjusted to the Covid restrictions, but what we didn’t expect was the transition from tax professionals to temporary business loan and grant agents! As trusted advisors, tax and accounting professionals have delved into utility programs like the PPP to save our clients’ businesses.
Fortunately, the IRS granted a three-month extension from the traditional filing deadline of April 15 last year, but between the initial coronavirus shock PPP and a massive amount of new tax laws, there was little downtime during the 2020 extended filing season. In fact, many felt that despite the filing of the returns for 2019, the season never ended and only tightened at the beginning of the 2021 season.
Challenges remain for 2021
Even though we are now in the second year of the pandemic, the challenges remain. Covid is still affecting the way we do business – physical offices are closed so virtual meetings are the only interaction we’ve had with each other and with our customers in over a year! Letting employees work from home not only creates training and management problems, but could also mean new government filing considerations for companies.
The traditional April 15th due date was extended by a month, but it was very limited, leaving much of the normal workload compression. In addition, the 2020 tax return has a significant part of the business stimulus laws, and questions remain to address several important issues, such as: B. to calculate the employee loyalty credit as well as the timing and reporting of the PPP.
Many consider it advantageous to extend it more broadly. Tax returns generally take longer to prepare this year, with most having at least one incentive-related topic to deal with. And partnerships will have to make new demands on tax capital reporting this year too, which in itself would be no mean feat! Add to this a near-constant rollout of the small business utility program requirements that also take a lot of the load off traditional tax and accounting duties, and we have another stressful filing season in the works.
Correspondence with the IRS also remains a challenge. Last year, physical IRS locations were understandably closed to help control the virus. Many continued to work from home, but the IRS had a serious mail jam that resulted in false notices being sent and confusion to taxpayers and professionals. The backlog has been significantly minimized, but attempts are still being made to contact service to resolve any outstanding issues.
But while the IRS has taken a lot of the heat, they are also feeling the pressure. When tax law changes, forms, software and instructions have to follow suit – and quickly! The Treasury Department was also tasked with running three rounds of stimulus payments to individuals. The IRS is underfunded and understaffed, and at the same time the tax profession is overworked and exhausted. Patience and grace are required on both sides – we have to be on the same team and not in the opponent.
What the future brings
Tax policy is a priority for any new administration. Like it or not, we might as well get used to the idea of frequent changes. President Biden has made it clear that he intends to seek tax increases for the rich while parts of the TCJA are being rolled back. Look out for increases in corporate tax rate, the highest individual tax rate, and capital gains tax for high earners.
On the employer side, Covid has shown that work can be done remotely and it is a benefit many enjoy. A survey by the Pew Research Center found that the number of work-from-home employees rose from 20% to 71% as a result of the pandemic, with more than half of employees wanting to maintain their remote environment after Covid. Physical office locations are important, however, and virtual meetings cannot be compared to face-to-face socialization. A compromise could be a back-to-the-office commitment, indulgent for those who wish to work from home.
Covid has also advanced the technology for both businesses and their customers. Many are realizing the benefits of virtual document storage without the need for paper files. Customers and partners who previously opposed the portal may have a new appreciation for its features after having had to use it over the past year. The IRS is also advancing its technology, following a modernization plan, and allowing additional forms to be signed or submitted electronically.
The pandemic has also proven how strong and resilient we can be when faced with adversity. Human nature is designed to survive and adapt, and although the past year was devastating for many, hope remains forever. This too will pass and we will flourish again – it will be better next year! And if not, we can do it together.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.
Information about the author
Amie Kuntz is a CPA, MA, with RubinBrown in Denver.
Bloomberg Tax Insights articles are written by seasoned practitioners, academics and policy makers to discuss developments and current tax issues. To make a contribution, please contact us at [email protected].