What do tax pros need to know about the uncertainty in Washington?
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Quick Tax Tip
With Art Werner
CPE Today
With tax season in full swing, CPAs and tax professionals are juggling client returns and a rapidly shifting tax landscape. In the latest Quick Tax Tip, Art Werner joins Rick Telberg of CPA Trendlines to dissect the state of tax policy, IRS challenges, and how accountants can turn uncertainty into opportunity.
From looming IRS layoffs to the evolving role of technology in compliance and planning, this conversation is packed with insights that every tax practitioner needs to hear. Here are the biggest takeaways:
1. IRS layoffs: A revenue nightmare?
The potential for massive IRS staffing cuts raises serious revenue collection and taxpayer service concerns. Werner warns, “The IRS, in my opinion, is the one government agency that if you spend a million dollars, you get 10 million back.” With the IRS already facing a 20-million-return backlog, further reductions could mean longer processing times, more uncollected revenue, and increased taxpayer frustration. Werner also cautions that some tax practitioners may be tempted to push the envelope on compliance due to reduced oversight—a mistake he warns could have serious consequences down the line.
2. Clients watch the news. Are you?
With tax policy uncertainty at an all-time high, clients are bombarded with conflicting headlines from news outlets everywhere. That’s why Werner urges tax professionals to stay informed. “We have to watch the news because we know our clients are watching it,” he explains. “And we have to be able to interpret it in a meaningful way.” Rather than reacting to clickbait headlines, practitioners should focus on direct, proactive client communication—via newsletters, emails, or regular updates—to reassure clients that their tax professionals are on top of the changes.
3. The future of tax compliance: A European-style system?
Is the U.S. tax system shifting toward automated tax compliance, where the IRS pre-fills returns for taxpayers? According to Werner, the technology exists—and tax professionals should take note. “We have the technology for the IRS to know what our income is,” he says. “If we move toward a system where the IRS sends taxpayers a pre-filled return, compliance-based practices may see major changes in the coming years.” For tax professionals, this means shifting from compliance-focused work to high-value tax planning—a move that increases profitability while also making the profession more attractive to new talent.
4. The tax bill roller coaster: What’s next?
With a new administration in Washington, tax legislation remains in flux. Key areas to watch include:
- Tax Cuts and Jobs Act extensions – Expect at least a temporary renewal rather than permanent implementation.
- Estate tax changes – These could become more aggressive as lawmakers seek to address the national debt.
- Bonus depreciation – President Trump has hinted at restoring 100% expensing for business purchases.
- State and Local Tax (SALT) deduction cap – High-tax states are pushing for an increase.
Werner predicts that significant tax changes will emerge by April 30, allowing time for planning rather than last-minute adjustments in December.
5. Estate planning: The next big tax battleground?
One of Werner’s boldest predictions is an upcoming “tax on death.” With $85-$95 trillion in generational wealth transfers expected in the coming decades, he argues that the federal government will move to capture a significant portion of that wealth. “If Congress realizes they can tax people who don’t vote—the deceased—there could be a significant death tax coming.” For tax professionals, this means getting ahead of estate tax planning now—before new legislation creates costly surprises for clients.
6. Turn uncertainty into opportunity.
While political and economic uncertainty may seem challenging, Werner sees it as an opportunity for CPAs and tax professionals. “Uncertainty creates opportunity. If clients are worried and they trust you, they’ll come to you for answers. This is where tax professionals can deliver real value—by offering integrated planning that goes beyond compliance.” Instead of focusing solely on compliance, tax professionals should pivot toward tax strategy, financial planning, and risk management—services that are more profitable and less reliant on busy season.
In a world where tax laws are shifting, IRS resources are shrinking, and technology is transforming compliance, the accountant’s role is evolving. Quoting another, Telberg offers, “Clients listen to their lawyers, but they obey their accountants.” By embracing a proactive, advisory approach, tax professionals can future-proof their practices, enhance client trust, and command higher fees—all while navigating the most uncertain tax landscape in years.
Transcript
(Transcripts are made available as soon as possible. They are not fully edited for grammar or spelling.)
Rick: Let’s start with the current events. Let’s start with the IRS.
Art: Sure.
Rick: There’s talk about massive layoffs at the IRS. How seriously do you, as a close watcher of these things, take that kind of political positioning? How seriously should tax havens, practitioners, preparers and accountants be taking it?
Art: I’m going to tell you something, Rick. It concerns me. I want to be very clear when I was watching this. I can speak for myself, but I’m sure I’m speaking for you, too, we’re not making any political comments here. No one knows my politics. No one knows your politics. I don’t even know your politics. You don’t know mine. Why am I concerned? It has nothing to do with being on one side of the debate or the other. The IRS, in my opinion, is the one government agency that if you spend $1 million you get $10 million back.
The idea of cutting the agents in half, does that mean that our revenues decrease in this country? We’re trying to eliminate a deficit, a national debt. This is interesting, to say the least. 50% cutoff, what does that mean? It means that the practitioner not only is trying to deal with the service but probably can’t even communicate with them anymore. I am very concerned about this.
I also think that there are going to be practitioners, and we’ve got to be careful here, who might be making an assumption, and that is you take advantage of this. Can we be more “aggressive” because we know that we’re not being watched, which is so against our ethics and so against our craft? I’d like to think that we’re doing the right job. I believe there’s going to be temptations there, and I think that some people are going to really do more than just stub their toe, if you want my opinion.
Rick: What do you think is going on in conversations between the practitioner and the client? What’s the client asking or telling the practitioner? What can the practitioner tell the client?
Art: First and foremost, I don’t know that the practitioner can tell them much yet, because we’re still waiting for the true ball to drop here. We don’t know what the new tax bill is really going to be. We don’t know what is really going to happen in the service. Are they really going to cut half of the employees? Will there be a technology input that’s going to replace a human with a computer? If I’m a client, I am probably worried right now, because it’s just the uncertainty effect, and if I’m a practitioner, I’m busy doing tax returns, and I can’t answer this question right now.
You could actually have a problem where your client might feel alienated. You’ve got to hold their hand at the same time, say, “Please be patient. I will have as good an answer for you as possible.” I think we also, as a practitioner, need to probably tell a client, “Some of you will anyway, be getting letters in the mail that might not make any sense. We will be trying to communicate with the IRS, and it’s not going to be, “Well, we just got through to them.” They’re going to have to be told that patience is going to be a big virtue. That’s where I see the real problems, Rick. I don’t know about you. Do you agree?
Rick: There’s already, lest I check, a 20 million tax return backlog at the IRS, and going into the season, with any sort of impediment at the IRS, that just gets worse. You’re absolutely right, every dollar invested in the IRS is $10, $20, $400 by some calculations returned.
Art: Rick, I know that you know this, and I hope that I’m not being too low-level here, but a lot of us realize that when the IRS didn’t have the proper funding, what were they doing? They were going after the low-hanging fruit. You might as well grab what you can, it’s easy. That’s generally not the individuals who probably are playing more games than others. I feel very bad for, let’s say, a low-income person who now not only is trying to make ends meet but is now being inundated with possibly IRS issues, whereas certain clients are probably getting away with issues that they would never get away with before.
Rick: How do we read the news? Should we be paying close attention to what’s going on, or should we be paying attention only when things seem to clarify?
Art: We might not agree on this, but I’m of the opinion that we should be paying close attention to everything that is coming out, only because your clients are paying close attention, and you also have to figure out where your client is getting this news from. At least, Rick, we have the ability to do significant research, we have tools that the average person isn’t going to be utilizing, so where is your average client getting their news from? It’s Fox, CNN, MSNBC, three-minute blurbs that scare you one direction or the other, and now your clients are coming to you, and you going– You probably can’t even guess which network they watch by the way they pose the question to you.
I don’t believe any of this is news, and that’s in my opinion, regardless of what you’re watching. I think we have to watch it because we know that the clients are watching it, and then we have to be able to go back to a client and say, “We actually understand how to gather information in a much more significant way, it’s our job. Don’t listen to those pundits,” because they’re now pundits.
Rick: Should accountants be getting emails and communications out to clients saying, “We’re following the news like you are, and when we know something, we’ll be the first to know”? Should accountants be taking extra care, and extra steps for client management?
Art: I think so, and I think that actually has another benefit, and that is your clients love to know that you’re communicating with them, so they get this email, they get this newsletter that explains this, and maybe it stops the question. They say, “Okay. He or she gets it already. I don’t have to ask it, they’ve already answered it for me, and I know that my accountant will be on my side when the issues appear.” I think that you have to do this periodically, it’s not just one little email, maybe it’s even a planned series of emails. We’re going to be sending you something every week or so, please don’t ignore it.
Rick, I don’t know how you felt about this. I was always teaching accountants and other tax professionals, I said, “The best thing you can do is have an email newsletter or some form of newsletter you send out to your clients. Just understand they’re not really reading it. They might not be. They might read the headline of an article and that’s it, but basically what it’s telling them is, my accountant, my tax professional is knowledgeable and I don’t have to worry. They’re going to help me. I don’t need to understand all this, all I have to do is go to them when I have the issue. I don’t know if you feel that same way.
Rick: Yes, clients need to know that the accountant is looking out for them. That is the main point of added value they’re looking for, the ability to sleep at night. The ability to take their eye off of this technical stuff and know that someone is taking care of it. We’ve been dealing with a less-than-optimal IRS for a long time. Knowing how a less-than-optimal IRS has impacted professionals, how would a much less-optimal IRS further impact professionals? Are there things that practitioners will need to be doing differently?
Art: I believe that the era of trying to get someone on the telephone is done. It’s already been a problem. I’ve had practitioners tell me prior to the Inflation Reduction Act that they would call the IRS, and they’d have other work they’re doing and they’d be on hold for two hours or maybe even more and then finally someone would either get on the phone or they just give up. If you didn’t like two-hour waits, you’re really not going to like what’s going to happen.
I can tell you this, I actually know certain agents. The morale at the IRS right now has never been lower. I’m not sure that these agents are really going to be able to be as helpful. If you cut the agency but the work is still there, what does that tell you? Either half the stuff doesn’t get done or everyone has to do double time. That’s not the way I like to work.
Rick: It’s long been considered that technology could have a bigger role to play in tax return processing. Is that a realistic possibility at this point?
Art: I think it’s going to have to be. I attended a lecture a number of years ago and it was funny because the speaker was talking about how things are done differently in Europe. If I’m a European, do I go through this busy season? The answer is not necessarily. You get a letter in the mail from your country’s taxing authority saying, here’s what we think your taxes are because they get all the information, their equivalents of 1099s, W-2s, et cetera. They put together a tax return and the European taxpayer says, “I either can agree with this, I sign off and that’s fine. Either I owe money or I’m going to get a refund or I can challenge it.”
You file a tax return when you challenge that. We have the technology. Maybe it needs to be finessed a bit but the IRS knows what our income is and so maybe this is the beginning of going towards a European system. This is important for the practitioner because if you have a practice that is dependent on tax compliance, in three, four, or five years from now it might not be the smartest type of practice. I believe that the practitioner should be more heading towards the planning aspects where we’re directing them in certain areas and that’s much more fruitful plus it’s also not based on an April 15th deadline.
Maybe this is a good thing in certain ways. Maybe technology will make it so that the history lessons that we give our clients each year aren’t the important piece. The planning to get to that next year’s history lesson is what we really want to do. That might be what’s happening.
Rick: The irony is if things get so bad that technology has to take over, the compliance work becomes more scarce which almost seems like an irony. It seems like if there are fewer people at the IRS to do the work, is it possible that there would be more pressure for ex-practitioners to do more work?
Art: I think there might be more pressure to actually put a client in a position that they don’t have to necessarily worry about compliance. If in fact we’re getting to that point where the IRS or whatever the agency would be will send a client a letter saying, here’s what we think your taxes should be, it’s how we got to that number. Now you’re giving proactive advice, say, do this, do this, do this and that letter is going to be a lot better. To me, that’s more fulfilling. Maybe this is actually a good thing, Rick. I’m talking to you and feeling actually pretty good about this. Maybe cutting the agency might actually spur our practices in a different direction. Interesting.
Rick: Interesting, and not what I expected to come out of this conversation. Thank you. Next question.
Art: Go ahead.
Rick: Next question, tax bill. Where are we in a tax bill? How should practitioners be thinking about a tax bill at this point in the year?
Art: I think, Rick, that there are many open areas. I’m not trying to promote a class and that is not the reason I’m about to say something. I was actually asked by a state society to create a class saying, hey what do we think the tax bill is going to be? I had a laugh because I said, “I’m happy to do that, but why do you think I know any better than anyone else?”
I did put a class together and I warned everyone. I said, “I’m giving you projections here and I’m going to be half 50% right.”
In other words, to flip a coin on this, there are certain things I think that we can understand. With President Trump and in a Republican-controlled House and Senate, albeit small numbers, I think we can safely say that a lot of the Tax Cuts and Jobs Act items that were going to sunset will be at the very least extended. If you want my opinion, if there’s going to be extender legislation, I believe that it would be extended throughout the Trump term.
In other words, we wouldn’t see this happening again in two years. It would happen under a new president, be it a Democrat or Republican, but it would be someone else. I don’t see it being made permanent. I don’t think they have the votes to do that. I’m looking at this as temporary. I’m looking at where we also have to figure, how do you eliminate a debt. That’s always in the back of everyone’s mind. I’m actually a big believer that the estate tax is going to become much more confiscatory, but that’s only a gut feeling at this point, Rick.
I’m hearing there are people in Congress who want to eliminate the estate tax. I don’t think that’s going to happen. What happens to 199 Cap A? We have a whole system now based on a 20% lop-off of income for non-C corporation businesses. Will that continue? That could sunset. Then I heard President Trump say he would like to see bonus depreciation go back to 100%. He didn’t mention the word bonus depreciation because the average client doesn’t understand what that word means, but he’s at expense all the items that a business pays for. I’m assuming it’s bonus depreciation back in 100%. What a rollercoaster on that.
How about states like where you’re from? New York. High state and local taxes with a $10,000 CAP, and now there are people within New York who say that’s not fair, and I happen to agree. Will they change the $10,000 assault limitation even though they’re going to extend that piece? Will that apply? Will the alternative minimum tax be changed? That could be happening if they push up the assault limitation to a higher number. Suddenly AMT comes back into play.
This is not as simple as we might hear on Fox, MSNBC, or CNN. Let’s go to extend the law now. It’s going to be something more to it, and we don’t know it yet. We really don’t know it. Yes, the House tried to pass something. I don’t know what the Senate’s going to do. We have to keep our finger on the pulse of this. Sorry for the long-winded answer.
Rick: No, it requires an answer in depth.
Art: I wouldn’t be good on Fox or CNN. They say, “Hey, we got time out. Sorry, we have to get the next person.” [laughs]
Rick: Oh, you’ve got a talent for it. Don’t underestimate yourself. When will things clarify? When will we know to watch out for a tax bill? What’s your read on the give-and-take of the politics in Washington right now that suggests– Is this going to be something that happens in the next few weeks and months, or is it something that’s going to be pushed off to the end of the year, and we’re going to have a nightmare of new rules and rights on December 31st or even January?
Art: I will give you my opinion, and I’m going to tell you something that I don’t think you knew about me. When I was in undergrad, I didn’t know what I wanted to be. My parents wanted me to be a doctor, just so you know. I was actually taking science classes, which I hated. I finally had enough guts to tell my parents I didn’t like it. Rather than I thought I was going to be barraged, they said, “Okay, we’ll find something else.” I said, “Duh.”
Make a long story short, I liked some accounting classes I had played with, so I took that, but I also had all these free credits because I had to get accounting in. It took me four and a half years to graduate, I filled up the free credits with Poli-Sci classes. I actually have a degree in political science as well as accounting. Unusual undergrad. Make a long story short, I loved Poli-Sci. It was fun. Accounting was practical, but I never thought I’d use Poli-Sci until recently. I actually learned things.
This is what we refer to sometimes within the political science mold in two things, one, you hear the word mandate, but it was really not a mandate. It was probably like 52% to 48%. That’s not a mandate. It’s a move, but it’s not a mandate. Maybe one party feels that they can do things that the country doesn’t necessarily want. The second thing is that there’s usually a 100-day period of time where there’s a honeymoon period. This might be a quicker honeymoon. 100-day period.
It’s my opinion that they need to push this bill out by April 15th. Now, that’s a month from when we are filming this. People are watching this later, so I don’t want to use a month. Let’s say April 30th. I actually think that by the end of April, there will be something. I’m going to be laughing when people are watching this at the end of April, and we’re nowhere near that. People will call me up and say, “Hey, Art, you were wrong. Haha.”
I’m of the opinion it’s not going to be at the end. I like that. If I am right and something comes out, we’ve got a whole year to plan. From what I heard, the law will be effective until January 1 of next year. This gives us a whole season to do some really serious planning.
Rick: I hope you’re right. That would be the best of all possible worlds for the tax business.
Art: We’re hearing some other things, like no tax on tips, no tax on Social Security. We’ve heard that. I haven’t heard this one lately, but no tax on overtime. I can already think of what I would do. I’d hire someone at minimum wage and pay them a lot of overtime. Are people going to come up with games like this? I just don’t know how all that fits in. Yet they were campaign promises.
By the way, especially with the tips, it was campaign promises on both sides of the debate on that one. Will this happen? Will this be part of the new bill? From what I heard, so far it’s not. Does that mean newer bills? I really do believe this, Rick, I think that there’s going to be a tax on death. I think that’s going to be a separate bill. That might come towards the end of the year.
Rick: Explain that a little bit more.
Art: We have a $35 trillion national debt. We have individuals who are passing away, unfortunately, in significant numbers. Elder individuals passing their wealth to baby boomers and Gen Xers. From what I read, it’s anywhere from between $85 and $95 trillion of wealth that’s passing. Federal government captures a third of that wealth transfer the national debt’s essentially eliminated. We are smart like this. You don’t think Congress knows this?
I have had experience when I was a practitioner. I did a lot of estate work. I had two types of clients, I had one client who came to me because they had a large estate. They didn’t want to pay taxes. We developed sophisticated estate plans. Then we also did estate administrations. What we learned about the heirs, where the heirs didn’t care about the tax. All they cared about is, “How quickly do I get this money? It’s found money. When do I get it? When do I get it?” “You’re going to lose a third of it, maybe.” “I don’t care. When do I get my two-thirds?”
If Congress realizes that, they’re not taxing people who vote. I actually think that there’s going to be a significant debt tax. It might not be posed as an estate tax. It could be posed as other things, such as an income tax on qualified plans. It could be a wealth tax upon a transition. There are many ways to do this. I think that we need to be aware of this because we do have obligations to our clients to say, I don’t mind the tax. I just don’t want you paying it.
Rick: How do we possibly plan for that? How do we possibly prepare our clients in terms of estate planning for these kinds of eventualities? Are there things we should be doing now to prepare for possibilities like that?
Art: I always believe that an individual should have an estate plan that essentially says, the day after I sign off on this, I die. We want it to work under the way the law is. We also need to have serious conversations with clients saying that we have to find a way to understand what might be the future. I think that we should be educating our clients, maybe through the newsletters again, saying it is our opinion there are going to be significant changes in the area of estate planning. This is what we do. Let’s set up an appointment and then we tickle our system so that we can tell a client, “Here’s something that’s coming out. Here’s something that’s coming out. Here’s how it affects you.”
By the way, this is serious billable time for people who are looking at building their bottom line. I don’t know what the average person who’s watching this, what their hourly rates are, but I would say that all accountants have various rates. This is your premium rate when it comes to estate. You want to get out of the compliance rate into the premium rate. Being proactive with the client, they’re going to appreciate this. I have a class where I– I wish it was my idea. I read about this in an article. I tuned it to Jim Phelps, however, of the old Mission Impossible.
You and I were watching that, the ’60s and ’70s TV show where this Phelps character would put a team together to solve a major problem. I believe that’s the accountant. It’s a team approach, but someone has to coordinate all this. I’m going to tell you, the attorneys do a great job drafting documents, but they don’t see their clients on a regular and frequent basis. The insurance people sell products, which is not a bad thing either, but someone has to be watching over all of this.
I think you can put yourself as an accountant into a position where you really can be on top of that client, and the client will look at you as the individual who has to be consulted before they do anything else. Just let them know that the law will change, and we’re going to be there for you.
Rick: It’s been said that clients listen to their lawyers, but they obey their accountants.
Art: I agree. I also will tell you that the accountant is looked at as more of a neutral person, and we have to get out of that neutrality. If I’m preparing books and records, yes, I have to be independent. The attorney, that would be malpractice. The attorney has to represent the client’s interests, but when it comes to estates or any type of planning, but in estates, we’ve got to take off the hat of independence. We’re not independent. We’re that advocate. We’re the advocate who knows the numbers. We’re the advocate who knows the wealth of a person. We’re the advocate who knows the tax law. It’s significant.
Rick: We’re going through a time of great uncertainty. What are the opportunities in a period of uncertainty like this?
Art: I’m taking my time answering, and I think people should know that we didn’t prepare this. This is not a scripted event, so I love that question. I think uncertainty actually creates opportunity. If there’s uncertainty, the client is concerned. If the client is concerned and the client trusts you, they’re going to come to you with the concerns, or you can bring up the concerns. We can strategize. We can put together a comprehensive plan that is not just estate-oriented. It’s financial planning-oriented. It’s tax planning. It’s retirement planning-oriented. It’s risk management. It’s asset protection-oriented.
I refer to this as integrated planning. We can tie all these items together, and it can create a major engagement. I think uncertainty actually is profitable for us. I don’t think it’s something we should relish. I would rather live in a certain world rather than an uncertain world, but if it’s going to be there, why not take advantage of the opportunity to build a practice around it?
Rick: Accountants have the role of a firefighter or an emergency medical technician. We don’t want to see the fires, we don’t want to see the injuries, but when people need accountants, they need accountants.
Art: Absolutely. I think also that if you really can create a practice around this, you might actually generate individuals who say, “I want to work for that firm.” I think we’re having a difficult time getting certain new people into this industry and maybe it’s because who wants to work ungodly hours from February 1 through April 15th? What I just described isn’t that. I described a good, solid practice that has no busy season. It’s just there and it’s higher billable rates and suddenly, if I’m an individual, I’d say, “Hey, this looks pretty good.”
Rick: Makes a lot of sense.
Art: I’m an optimist. [laughs]
Rick: We have no choice these days. We have to be optimists. Art Werner, thank you very much.