Taxpayers surge into e-filing. Growth in do-it-yourself electronic filing of tax returns is advancing by more than 4% this year. But among tax professionals, it’s flat this year, after a 3% decline last year.
Hot-button issues. Tax guru Bob Jennings (CPA, EA, CFP, and RTRP) has been polling past attendees of his CPE seminars about Tax Season 2013. Clearly, tax professionals are still seething. “We sent our survey out and it must have pushed a button because the responses overwhelmed our servers,” says Jennings, taxspeaker.com. The results may not surprise you. But they are sobering nevertheless. He offers new data on: workloads, profits, software, volume of returns handled, retirement plans, and the use of engagement letters and portals. Here are the highlights so far:
A new CPA Trendlines analysis of long-term tax season activity shows how tax professionals may be working harder and enjoying it less. We’ll let two charts speak for themselves. – Rick Telberg Even as tax professionals have been increasing the number of e-filed tax returns…
The nation’s tax accountants failed in the final days leading up to April 15th to close the gap commonly attributed to early-season delays and confusion, according to the latest data available. But if the shortfall holds through coming weeks of data gathering, CPA Trendlines believes it could mark a significant and serious downturn in the future of the tax prep industry. In this report: Tax professionals e-filed 63.3 million returns, down 0.4% from last year’s 69.6 million. Meanwhile, the number of do-it-yourself e-filers grew 4%, to 43.1 million, up from last year’s 41.3 million. Complete statistics on individual income tax returns, filings and filing rates, week by week, in year-to-year percentage change Number sent to IRS Number processed by IRS [...]
New data obtained by CPA Trendlines shows that 84 percent of small-business owners are now paying an independent tax practitioner or accountant to handle their taxes. In addition, an increasing number of small business taxpayers appear to be taking advantage of Sec.179 expensing and bonus depreciation. The new report available from CPA Trendlines includes information on: the number of small business owners who use an outside tax or accounting service how many hours per week a small business spends on payroll tax administration average cost for using a payroll agency hours spent on federal tax various tax burdens how to download complete report (PDF, 13 pages)
Those who know Ed Mendlowitz, author of the CPA Trendlines Tax Season Opportunity Guide, know that he doesn’t like extensions. However, there are valid reasons for extensions. Ed grudgingly admits to 12: You did not receive K-1s or 1099s or other documents with information that you need to report. You did not receive letters confirming charitable contributions that are required to be in your possession by the due date of your tax return. There is pending litigation and reporting certain transactions might prejudice your position, or you are awaiting resolution that might cause or affect an adjustment or estimate made for last year.
At this rate, practitioners may be on track to make the April 15 deadline, but just barely. At the same time, the number and proportion of self-prepared returns continues to rise. It has been estimated that between 2010 and 2012 some 12 million taxpayers dropped out of the paid-preparer market to go to do-it-yourself software programs. And that trend is clearly continuing. IN THIS REPORT: The box score so far this season, compared to year-ago periods.
Practitioners should consider how many of these mistakes they might be making right now, from Ed Mendlowitz, CPA and author of “The Tax Season Opportunity Guide.”
by Ed Mendlowitz Adapted from The 2013 Tax Season Opportunity Guide One way to guarantee extra work is to have everything always done differently each time it is done. Not establishing uniform procedures is bad business and unnecessarily consumes part of your life. Consistency in performance reduces work and review time and creates a greater reliance on the staff people. Checklist:
Will this be remembered as another “tax season from hell?” Join the survey; get the updates. by Rick Telberg CPA Trendlines Research The last time tax professionals slogged through a tax season from hell, it was 2008, the financial world was crashing into a million little pieces, and 1 in 4 accountants was reporting disastrous operations. Before that, long-timers might recall 1995, when the IRS deployed a filing fraud crackdown that delayed millions of refunds. MORE TAX SEASON RESEARCH: Tax Pro’s Turn Negative on Busy Season | Busy Season Outlook 2013 | Top Tax Season Trends, Issues and Opportunities This year, with the IRS opening the filing gates not until March 4, could 2013 become another one for the record [...]
Help them to do what you want. by Ed Mendlowitz Adapted from The 2013 Tax Season Opportunity Guide Providing instructions of what a client needs to do must be clear enough so that the client doesn’t call you to find out what to do. Sometimes taking an extra minute to lay out what the client should do can eliminate that call or indecisive moment a client might feel. The object of the instructions is to have the client do what you want them to do.
Chicago CPA Jody Padar helps clients calculate their carbon footprint. In a sign of things to come as consumers turn to socially responsible shopping, one of the profession’s leading changemakers, Chicago CPA Jody Padar, is launching the world’s first online tax return service that helps clients save money on their taxes while showing them how to reduce their carbon footprint and earn green perks. Branded EcoTaxFile.com, the service “gives consumers and small businesses a level of confidence in their tax returns that can only come from working with a full-time accounting professional,” says Jody Padar, CPA, MST, operations director for EcoTaxFile.com and one of Accounting Today’s 100 Most Influential People in Accounting as an advocate for forward-thinking CPAs. She practices [...]
Washington brinksmanship spells big crunch for preparers. Join the survey; get the updates. by Rick Telberg CPA Trendlines Research With Tax Season 2013 delayed by last-minute code changes, staffing problems and software glitches, the mood of the profession is turning markedly sour. “IRS delays will cause confusion and errors, and many upset clients,” says Charles Postal at Santos Postal, a five-partner firm in Rockville, Md. “More extensions will depress cash flow.” At the same, Postal adds, “Clients will have more tax needs, but the struggling economy will depress their ability and desire to pay for services.” In order to battle the business pressures, Postal’s firm is “pushing back on fees, using standardized billing by product rather than hours, and adding [...]
The top ten tax questions that too often go unasked. Ed Mendlowitz, CPA Trendlines contributor and tax practice veteran, says he sees many professionals fail to systematically ask clients some basic and important questions. Here’s his top ten list of key questions to ask this year. What would you add? 1. Foreign bank accounts: Make you ask every client if they have a foreign account and if they do report the income and file the proper forms. The penalties are too great if it is wrong.
But most other rates are increasing. In another sign that the profession is pushing through at least some price increases in a highly fee-pressured environment, a new survey reports that professional tax preparers this year will be charging an average of 6% more for a typical 1040 with a Schedule A and a state return. Still, the survey finds price pressure for Schedule C’s. The survey shows pricing for the bread-and-butter forms delivered by local independent tax professionals, including: Form 1040 Schedule C (business) Form 1065 (partnership) Form 1120 (corporation) Form 1120S (S corporation) Form 1041 (fiduciary) Form 990 (tax exempt) Form 940 (Federal unemployment) Schedule D (gains and losses) Schedule E (rental), and Schedule F (farm) The survey also [...]
First: Are your fees high enough? by Ed Mendlowitz, CPA Author of “Implementing Fee Increases” and “The Tax Season Opportunity Guide.” Increase your fees 3-5% at a minimum – to offset your increased costs. Deliver your bill with the return. Call clients before return is sent to explain and give a heads up for unexpected results.