06Jun

Accountants may want to stock up on extra strength aspirin this tax season because, in the words of the chief tax officer at Jackson Hewitt, it will be “one for the ages.”

In an interview with Accounting Today, Mark Steber ticked off the issues tax accountants must confront before they even begin a return. There are the stimulus payments, and the details of the CARES and SECURE acts. There have been changes to the rules around retirement plan borrowing and small business loans, and, for those individuals who lost jobs, unemployment benefits and withholding on those benefits.

“There are so many issues to keep front of mind — a lot more to manage this year than any year in the past decade,” Steber said.

And then there are the taxpayers themselves and the surprises they may find.

Steber, and Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting, both predict that accountants are likely to have more than a few clients who believe their unemployment benefits were not taxable or failed to have withholding taken out.

Unemployment is taxable and with the extra $600 supplement so many received last year, those who didn’t have taxes withheld as they do from a W-2 paycheck may be facing a hefty tax bill. Complicating the situation is that some states tax unemployment while others don’t.

Besides the surprise about the taxability of unemployment benefits, Seber said many taxpayers who have been working from home are expecting a deduction.

A survey by his company found 80% expected a tax break for working from home. “But,” said Steber, “The deduction can only be taken by the self-employed. Because of the pandemic, a lot more people have a home office, but a lot more people do not necessarily get the tax deduction for a home office.”

Barbara Weltman, a tax attorney and author of Small Business Taxes 2021, told Accounting Today that the big issue for accountants right now isn’t necessarily taxes but helping their business clients complete the paperwork for the second round of the Paycheck Protection Program.

Said Weltman, “The biggest challenge will be finding the time to devote to counseling on the PPP loans while preparing tax returns.”

Then there are the conversations accountants need to have with their clients, including about fees and the additional work this year’s returns will require.

“These may be time-consuming, so it’s best they are addressed early in the filing season,” she said.

“A lot of the work is automated and practitioners will rely on their software, but they will still be working longer and harder as a result of all the law changes and uncertainties.”

Photo by Kelly Sikkema on Unsplash

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Taxpayers Love Their Accountant, but Want More From Them

Clients love their tax accountant, though half wonder if they’re doing enough to cut their tax bill.

Those seemingly contradictory opinions come from a survey by practice management software provider Canopy.

85% of the taxpayer respondents say they would recommend their accountant, despite 53% not being confident they’re getting enough help minimizing their taxes.

What the survey takers most appreciate is the in-person communication with their accountant. In fact, they appreciate these meetings so much they also list them as the No.1 thing they would change in their relationship. Both business owners and individual taxpayers want more in-person meetings.

Since the survey was conducted before the COVID-19 restrictions were imposed, we don’t know if taxpayers still consider in-person meetings so important or if Zoom meetings and phone calls have become an adequate substitute. However, all types of technology were clearly important before the pandemic.

After meetings, taxpayers said what they most liked next about working with their tax accountant was being able to send and receive documents online. That could be as simple as using email or a file hosting service like Google docs or Dropbox. In reporting on the survey. AccountingToday notes that “the most common ways clients exchange documents with their accountant are during in-person meetings, through hard printouts and via email.”

Before the shutdown, taxpayers were already noticing technology shortcomings. After in-person meetings, improved technology was second among the three top things they would change in working with their accountant.

Besides a secure way of exchanging documents, the technology features clients most want from their accountant are text chat and appointment scheduling. Women, according to the survey, want a chat feature even more than do men.

Chat would help get timelier responses, which is the third more important improvement they would make in their accounting relationship. A chatbot could help with routine questions, but the survey respondents felt getting a faster response directly from their accountant was most important to them.

One especially troubling finding is how little clients know about post-filing services like audit protection and legal tax services. A third of all clients don’t know if their accountant provides audit protection. Business owners are even less likely to know.

Photo by Kelly Sikkema on Unsplash

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