LESSONS LEARNT FROM 2013 TAX SEASON..

Going into the 2013 tax season, accountants and a large proportion of the general public were aware that changes to the tax code as well as tax filing systems used by the Internal Revenue Service would cause disruptions thanks to the highly publicized fiscal cliff. Though in a normal year tax season would be largely finished by summer, the eleventh hour legislation caused by the fiscal cliff has caused widespread need for tax extensions, meaning that this will be a busier than usual summer for tax preparers. At the same time, tax preparers are looking back at the impacts had on tax filing looking for lessons to apply to future tax seasons.

According to Padgett Business Services Chief Executive Officer Roger Harris, “Extensions will be a lot higher [this year] than in previous years, because of the late start. And taxes aren’t getting simpler. Everything is getting more complex.” Harris also noted the continuing trend of later mailings for tax documentation from brokerage houses, which forces tax preparers and clients to either wait to file returns or amend returns that have already been filed based on late arriving 1099-B forms. The delayed forms are yet another impact of changing tax legislation, as brokerage houses are subject to complex basis rules that were further complicated by the late start of the tax season this year.

Changing tax rules are also causing more work for tax preparers in another way: clients are increasingly seeking to reassess their tax situations in order to reduce tax liabilities. Now that rules are more complex than ever, Moss Adams partner Bill Armstrong notes,“There’s no boilerplate answer for anyone. There are so many taxes now that are fact-specific as to their application.” The picture is further convoluted by uncertainty on future rules changes, even as a 2006 interpretation by the Financial Accounting Standards Board has left businesses less flexibility in calculating and disclosing tax exposures.

As far as planning for future tax seasons based on the lessons learned in 2012 tax year filings, expert tax preparers are already predicting problems with the updated 3.8% Medicare tax, as it “applies to passive income, but there are questions as to what that includes, and how it affects real estate investors,”.

Anticipating these and other issues, tax preparation firms are also ready to hire qualified tax preparers and support staff beginning this fall. This is positive news for recent college graduates looking to enter the accounting field, the more so as many firms are now offering tax training and preparation classes.

President and chief executive of Peoples Income Tax and the Income Tax School Chuck McCabe has shed light on possible career paths for those entering the tax preparation field in these conditions, pointing out that the growth in firm-prepared tax returns is likely to be stronger for complex returns, which have a client retention rate approaching 90%.

The American Institute of Certified Public Accountants has called tax uncertainty the “new normal.” In this environment, qualified tax preparers and accountants may at least be able to fall back on the solace of job security.