It never fails—every year we come out of tax season confidently asserting the next will be better, or rather that it couldn’t possibly be worse! Are we hopelessly optimistic or putting on a brave face? There’s no doubt that each year presents its own challenges, and maybe it’s romanticizing the distant past, but the last few years have been brutal for tax professionals. Gone are the days of merely wondering if extenders would survive or what new business venture a client failed to tell us about until too late. It’s been a constant whirlwind of significant tax law changes to absorb on top of those concerns since at least the Tax Cuts & Jobs Act of 2017—the phrase “drinking from a firehose” comes to mind.
2020 Tax Season Mayhem
Despite a late extenders bill and major retirement reform, 2020 had hopes of being a semi-normal filing season—until Covid arrived. The global pandemic was unprecedented in our lifetime, bringing challenges to nearly every person and business, and the tax profession did not escape its wrath. While many tax firms and their employees were used to some form of a remote environment and had a technological framework to quickly transition, numerous firms that relied upon paper and in-person meetings scrambled to adjust.
Eventually our industry did adapt to Covid restrictions, yet what we didn’t anticipate was the transition from tax pro to temporary business loan and grant officers! But as trusted advisors, tax and accounting professionals stepped up bigtime diving into relief programs—such as the PPP—to help save our clients’ businesses.
Fortunately, the IRS granted a three-month extension from the traditional April 15 filing deadline last year, but between the initial coronavirus shock, PPP, and a massive amount of new tax law to take in, there was little downtime during the 2020 extended filing season. In fact, despite filing 2019 returns, many felt like the season never ended, and only compounded once the 2021 season began.
Challenges Remain for 2021
Even though we’re now into year two of the pandemic, challenges remain. Covid still impacts how we do business—physical offices are closed, leaving virtual meetings to be the only interaction we have had with each other and our clients in over a year! Having employees working from home not only brings training and management challenges—it could mean new state filing considerations for firms as well.
And while we got a one-month extension of the traditional April 15 due date, it was very limited, leaving much of the normal workload compression. In addition, the 2020 tax return is where a significant portion of stimulus legislation comes to roost, with questions remaining on how to treat several important items, such as calculating the employee retention credit and timing and reporting considerations for the PPP.
Many feel a broader extension would have been beneficial. Tax returns this year are taking longer to complete in general, with most having at least one stimulus-related topic to contend with. And partnerships have to layer in new tax capital reporting requirements this year as well, which was going to be no small feat in itself! Add to that a near-constant rollout of small business relief program requirements, taking significant time away from traditional tax and accounting duties as well, and we’ve got another stressful filing season in process.
Corresponding with the IRS remains a challenge, too. Last year physical IRS locations were understandably closed in an effort to control the virus. Many continued working from home, but the IRS experienced a severe mail backlog as a result that caused incorrect notices to be sent out and confusion for taxpayers and pros. The backlog has been significantly minimized, but frustrations remain trying to contact the Service to resolve outstanding issues.
But while the IRS has been taking a lot of heat, they feel the pressure as well. When tax law changes, it means forms, software, and guidance all need to follow suit—and quickly! Treasury was also tasked with rolling out three rounds of stimulus payments to individuals. The IRS is underfunded and understaffed, and at the same time the tax profession is overworked and exhausted. Patience and grace are needed on both sides–we need to be on the same team rather than adversaries.
What the Future Holds
Tax policy is a focus for each new administration, so like it or not, we may as well acclimate to the idea of frequent changes. President Biden has made clear he intends to pursue tax increases for the wealthy, while rolling back parts of the TCJA. Watch for increases to the corporate tax rate, top individual tax rate, and capital gains tax for high earners.
On the employer front, Covid has shown that work can get done remotely and it’s a perk many enjoy. A survey from the Pew Research Center showed that work-from-home numbers jumped from 20% to 71% as a result of the pandemic, with more than half of employees having a desire to maintain their remote environment post-Covid. Physical office locations are important though, and virtual meetings cannot compare to in-person socialization. A compromise could be a back-to-the-office obligation, with leniency for those who thrive working from home.
Covid has also progressed technology, for both firms and their clients. Many are realizing the benefits of virtual document storage, with little need for paper files. Clients and partners who previously resisted the portal may have a newfound appreciation for its capabilities after needing to utilize it this past year. The IRS is also advancing its technology, following a modernization plan and allowing more forms to be signed or filed electronically.
The pandemic has also proven how strong and resilient we can be when faced with adversity. Human nature is wired to survive and adapt, and though this past year has been devastating to many, hope springs eternal. This too shall pass, and we will thrive again—next year will be better! And if it’s not, we’ll make it through together.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Author Information
Amie Kuntz is a CPA, MA, with RubinBrown in Denver.
Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact us at [email protected].