Thanks to the biggest overhaul to the tax system since 1986, there’s more on your plate than usual this busy season. And while you’re managing client expectations and navigating the new federal tax laws, you have to consider accounting methods changes, Wayfair concerns and a prolonged government shutdown. It’s a lot to take on. But though this busy season may feel a bit daunting, remember that no one is better equipped to handle it than you.
As you look ahead to the task at hand, remember the famous quote by Babe Ruth: “Never allow the fear of striking out to keep you from playing the game.”
So, gear up to play the game and pay special attention to these key issues.
The government shutdown throws us a curveball.
Although many of us want to put our fingers in our ears and say “la, la, la” when we hear the words “government shutdown,” the potential effects on busy season and IRS services force us to listen closely to what’s going on. Keep in mind, the government has technically only reopened until Feb. 15, which means we may be looking at another shutdown during busy season.
The effects of the recent shutdown on IRS processes are yet to be seen, so prepare yourself and your clients for possible bottlenecks and delays. Check out the IRS’s FAQs and guidance about audit, collection and other activities following the shutdown.
The IRS has made changes to transcripts.
Don’t get thrown off base by IRS transcripts that look a little different than before. The IRS introduced a new format with redacted information and created a new customer file number to use as an identifier. However, practitioners who use the IRS’s e-Services can still get unredacted wage and income transcripts deposited into their e-Services mailboxes. And although the IRS previously stated that they planned to stop faxing transcripts, it recently announced it will extend its transcript faxing services beyond the planned Feb. 4 end date. (Stay tuned for a possible updated timeframe).
The partnership audit regime is alive and well.
The wait is over. The centralized partnership audit procedures under the Bipartisan Budget Act of 2015 (BBA) are in effect for partnerships with tax years beginning after Dec. 31, 2017, which means calendar-year partnerships must keep this in mind when filing their 2018 returns. Clients will need to decide to either elect out of the new rules or identify a partnership representative on their tax returns. Pay special attention to the new questions on Form 1065, U.S. Return of Partnership Income (see page three, question 25).
State and local tax concerns are growing after Wayfair.
Last year’s U.S. Supreme Court ruling on South Dakota v. Wayfair Inc., has an enormous influence on state and local tax considerations. Wayfair overturned 26 years of precedent by changing the nexus landscape from a physical presence standard to more of an economic-based standard. You should be touching base with clients about the potential effects on their filing situation. Use this Wayfair to get the conversation started.
Tax reform changes are causing uncertainty.
To put it simply, tax reform changed everything. From new deductions to an assortment of new forms, schedules and guidance, it’s made our job harder. But this is absolutely in our wheelhouse to handle. We just need to adjust and decipher what to do for each client individually.
Due diligence — Be sure you’re covering all bases this busy season. Use strong engagement letters that outline your specific scope of work (you can find templates of these letters in the Tax Section’s Annual Tax Compliance Kit). Document your files exceptionally well, especially when a client takes a position that may fall in a gray area of tax law. Also, refresh yourself with Form 8275, to reduce potential penalties.
Estimated taxes and penalties — The IRS responded to concerns that individual taxpayers may have found it too difficult to estimate their 2018 taxes because of the changes from tax reform. Instead of the usual requirement to pay 90 percent of the tax, individual taxpayers won’t be assessed the penalty if they paid at least 85 percent for tax year 2018. All tax software should be adjusted for these calculations this year.
You’re up against some heavy hitters this busy season. Remember to bookmark and use our busy season guidance and resource hub to have a smoother run of it.
Thinking positively for a minute: This season gives you, the CPA, an opportunity to really hit a home run for your clients. Step up to the plate and show your clients what you’re made of.