It looks like it may be a wild year for local tax preparers.
Tax law changes made by Congress under the American Taxpayer Relief Act on Jan. 2 are causing taxpayers anxiety, and tax preparers are going to have to work faster than ever to file returns. Because Congress took so long before extending tax breaks to delay the “fiscal cliff,” filing season will be shorter than usual this year.
“This is going to be the craziest tax season we have ever had,” said Michael Walter, a partner at TTD Bookkeeping in Killeen.
Walter said his company prepared about 3,700 income tax filings for clients last year. He expects to do the same this year, just in a much shorter period of time.
“A normal season runs from the Thursday before Martin Luther King Day until the April 15 deadline,” Walter said. “This year, we’re losing approximately 14 days out of the filing season. So if you are talking about doing 3,000 tax returns, and we do more than that, it can be overwhelming.
“Make your appointment now,” he said.
According to IRS.gov, the IRS will begin processing individual tax returns on Jan. 30. The catch, is it is tough to get prepared by then because the necessary filing forms have not yet been updated to comply with American Taxpayer Relief Act.
“Normally the forms are available by now,” said Candy Bell, Walter’s partner at TTD.
Penny Stephenson, CPA, CFE and forensic CPA at Lott, Vernon & Co. in Killeen, said this is not the first time she has dealt with late forms. But she said it has not eliminated the uncertainty felt by many of her clients.
“Nothing is out there ready for us,” she said. “No 1040s. No 1041s. None of it. They haven’t even opened up for e-filing.” Stephenson said she is fielding plenty of phone calls from confused clients.
“We get a lot of phone calls asking, ‘What do we do?’” Stephenson said. “We have fielded a lot of phone calls from people who are panicking because of the uncertainty.”
The IRS released a statement explaining the changes and delays. “We have worked hard to open tax season as soon as possible,” IRS Acting Commissioner Steven T. Miller said in the statement. “This date ensures the time we need to update and test our processing system.”
Walter said he understands the need to update and test the system after the new laws were passed, but he seemed surprised the IRS was so unprepared.
“There are changes every year,” Walter said. “Last year, there were 22 updates. This year, there are only two.”
Bell said the fact that nobody knows when they will receive their tax returns is adding to the apprehension and anxiety. She said while there is normally a one day turnaround, it is anyone’s guess how long it will take to receive refunds this season.
“They are saying they aren’t going to provide a schedule this year,” Bell said.
Keep communication flowing
Not all area CPA’s are feeling a crunch. John Lister, CPA of John Lister, Inc. PC in Copperas Cove, said his company prepares between 1,200 and 1,500 tax returns per season. He is not worried about the shorter filing period.
“We usually don’t start doing taxes until the first of February anyway,” Lister said. “It shouldn’t impact us.”
Lister said the important thing is to stay in communication with his clients. “We communicate with our clients as things develop, and most of them understand what is going on.”
Randy Stone, CPA at Wilson Derr Thompson PC in Harker Heights, said clients are naturally worried about a lot more than the filing period. They are worried they will be paying a lot more. According to the stipulations of American Taxpayer Relief Act, the tax rate will go up from between 10 percent and 15 percent to 20 percent for individuals making more than $400,000 and couples making more than $450,000. Stone said, theoretically, this change shouldn’t impact too many people.
“From what the administration is saying, the new rates will only impact between 1 and 2 percent of tax payers, but we really don’t know yet,” Stone said. “We’re not going to know until this year has been filed.”
Stephenson said she expects more than 1 percent or 2 percent of her clients to be impacted. She said people are justifiably worried about details buried within the minutiae of the new tax code.
“The one that will hit most people is if they need a medical expense deduction,” Stephenson said. “You are not going to be able to deduct as many medical expenses this year. Also buried in there is another surcharge on Medicare.”
Even though Walter is predicting “the craziest tax season we have ever had,” both he and Bell said it should not be a problem for TTD Bookkeeping to handle the onslaught. She said the key for any income tax preparer is to keep their clients happy no matter what the tax code is.
“Almost 90 percent of our clients are return clients,” Bell said. “Honestly, most of our clients don’t seem to be too worried. We get the normal calls we get every year, but we sent out letters to all of our clients about all of the changes.”
Naturally, Walter thinks it is in a taxpayer’s best interest to hire a tax preparer, but he has a bit of advice for those who decide to do it on their own.
“If you file online, make a copy of your return,” he said. “Without an actual copy, it is a 17-day process to do an amendment. It is a real pain in the butt.”
In other words, it’s tax season.
Contact Mason Lerner at email@example.com or (254) 501-7567