Tax Professionals Decide: Make the Net a Threat or Opportunity

By: Rick Telberg

Sept. 25, 2000 (SmartPros) ? As tax season approaches, tax professionals are being faced more than ever with a decision about the Internet: Is it a threat or an opportunity?

To Jan Bray, executive vice president of the National Association of Enrolled Agents, it is both.

“It’s an opportunity to reach out to clients,” she said. For example, the fact that the Web condenses distances means that tax practitioners can still serve their United States clients relocating out of town or across the globe. And it is an untapped tool in attracting new and expectant immigrants as new clients, she notes.

Bray is part of a new progressive thinking at the NAEA. For instance, at its annual conference in Washington, the group moved to broaden its membership by allowing a new class of “associate” members of non-licensed tax practitioners.

“We’re trying to elevate the whole practice of tax,” said Bray, “and to expand the horizons of our membership.”

The NAEA, based in Gaithersburg, Md., represents 10,300 enrolled agents, which are tax practitioners, largely former IRS employees.

The new associate members would be subject to the same code of ethics and educational requirements as regular members. But many other details for the category have yet to be worked out.

“We believe all tax preparers should be regulated in some way,” Bray said.

In another development, the NAEA leadership added a new wrinkle to the group’s dues structure, creating a corporate category.

The move allows large corporations to pay for the dues of their EA employees, and conceivably, associate EA employees. It is estimated that H&R Block alone has up to 6,000 enrolled agents on its payroll.

But for tax people, the Internet remains the single largest question. Bray notes that from 1979 to 1998, 70 million people were born. They grew up with electronic change at the heart of their lives. They are accustomed to short product lives, which means that they don’t expect everything to be perfect the first time — a different way of thinking for detail-oriented tax professionals. And these people are entering the workforce and they have taxes to pay.

Tax preparers are hardly preparers anymore. “The software does most of the work,” Bray notes. Instead, they are first and foremost financial advisors to their clients.

“Clients expect their financial advisors to protect their money and to find ways to increase it,” Bray said.

And it’s as true for all financial professionals as it is for enrolled agents.

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Posted on September 25, 2000
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Tax Simplification? Hah! It’s All Politics As Usual

By: Rick Telberg

Sept. 12, 2000 (SmartPros) ? Whether its Bush or Gore this election day, don’t count on tax simplification in the next presidential term.

After two years as ombudsman at the Internal Revenue Service, Val Oveson has stepped down. He is moving back home to Bountiful, Utah, and going to work for PricewaterhouseCoopers. At the annual meeting of the National Association of Enrolled Agents, he fired off a few parting shots at Washington and how Washington works.

He talked about paranoia in Washington, inertia at the IRS, the inevitability of e-filing, and a radical plan for overhauling depreciation rules.

But he started with the futility of pursuing tax simplification.

“There is no constituency for simplification,” he said. “The power behind tax legislation is for credits and breaks and incentives. Every credit, break or incentive complicates the tax code geometrically.”

The biggest blow to tax simplification, he noted, came with the ironically named Tax Reform Act of 1986. In essence, it exacerbated without resolving the age-old debate between changing the tax base — affecting how many people pay taxes — and the tax rates — affecting how much they pay.

“Flat tax proposals,” he said, “ignore the fact that 97 percent of the code deals with base.”

He also took a shot at the Alternative Minimum Tax. He pulled no punches, calling it “absolutely asinine and stupid… to have two completely different tax systems.” And then things were complicated even more by the 1993 collection of phaseouts, deductions and credits.

Oveson also came out for a complete overhaul of the depreciation rules. Depreciation disputes, he said, are the single biggest source of litigation in the tax courts, he said.

Instead, taxation could be greatly simplified just by allowing taxpayers to expense everything they now depreciate. “I’m convinced,” he said, “that if you allow taxpayers to expense it, then it will even out over time, with increased profits in the out-years and, so, increased tax revenues in the out-years too.”

Nevertheless, there is reason to hope that technology could help the everyday lives of taxpayers and practitioners alike.

“E-filing is here to stay,” he said.

But the public’s unfounded fears of security, compounded by what almost amounts to neurosis at the IRS, is holding it back. “We’ve got to be able to agree on what level of risk and security is reasonable and acceptable,” he said. “We’ve got to get over this paranoia about privacy.”

Oveson’s last remarks were saved for his audience of tax professionals. “We would not be able to operate the United States tax system without the practitioner.”

“Heck,” he said, “we can’t even answer our own phones now. We need to increase our reliance on you.”

Clearly tax professionals had a friend in Oveson. He’ll be a tough act to follow.

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Posted on September 12, 2000
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