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CPA Magazine’s T. Steel Rose recently sat down with Patti Newcomer, vice president of marketing for the Intuit ProConnect Group, to discuss challenges for CPAs in today’s tax environment as well as her thoughts on the future of tax and tax technology. Newcomer spoke of the difficulty some CPAs may face with new technology.
“I think there are three key challenges,” said Newcomer. “The first is firms adopting new technologies to get more efficient and the changes to the workflow as a result of that. The second is hiring and retaining talent that they need for their firm. The third is managing their reputation, especially online. As well as the social channels so that their customers will be advocates and recommend them to their friends and family.”
Newcomer predicted CPAs would play more of an advisor role to clients in the future.
“There are a couple things in the future that I think are really going to happen,” said Newcomer. “One is I think more firms will adopt technology and move to the cloud. I think that technology will automate more of the manual tasks that are done today in books and tax. I think that accountants will spend more time advising and being in that trusted advisor role.
“What we've learned in our research with accountants is the thing that's most important to them is making a difference in their clients’ lives. So getting out of the back office, getting out of the manual tasks. Not doing the number-crunching and the data entry will allow them to spend more time advising their clients and helping them run their business and make good financial decisions that will increase the likelihood that their businesses will succeed.”
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The IRS may not charge preparer tax identification numbers (PTIN) fees based on a summary judgment ruling by Judge Royce Lamberth in U.S. District Court of Washington D.C. on June 1 because a PTIN is not a “service or thing of value.” Tax return preparers brought a class action suit against the IRS claiming the IRS lacks legal authority to require tax preparers to obtain PTINs and to charge a fee for issuing them. The court did not grant summary judgment on whether the IRS has the authority to require tax return preparers to obtain PTINs. See Steele, No: 14-cv-1523-RCL (D.D.C. 6/1/17) for the 22-page ruling.
The user fee for issuing a PTIN began with the IRS tax return preparer registration program which was invalidated in Loving v. Internal Revenue Service, 742 F.3d 1013 (D.C. Cir. 2014). The IRS tax return preparer registration program required tax return preparers who were not CPAs, attorneys or enrolled agents to pass an exam and register with the IRS. The court found a government agency did not have the legal authority to require such a program. It would require an act of Congress which may be on its way. On May 23, the president released his budget blueprint which would explicitly provide that the Secretary of the Treasury the authority to regulate all paid tax return preparers.
The district court in Washington D.C. applied the standard of review of agency action found in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), to conclude the IRS had the authority to require PTINs because Code Sec. 6109(d) specifically and unambiguously gives the IRS the power. The court said, “The IRS has articulated satisfactory explanations for its actions.” The IRS' decision to use PTINs was not arbitrary or capricious.
A Supreme Court had determined a government agency may impose fees for bestowing on individuals special benefits not shared by the general public. The tax preparers argued and prevailed that “a service or thing of value” is required for agencies to validly impose fees (31 U.S.C. §9701) and therefore, the IRS could not charge PTIN fees because a PTIN is not.
Since the Loving case found Congress did not authorize a license requirement for tax return preparers, there are no restrictions on who may obtain a PTIN. Hence, no “special benefit” exists to being able to prepare tax returns.
Tax return preparer regulation has been a hot topic of discussion since the RTRP program was suspended in January 2013. The recent budget blueprint maintains a proposal from the Obama administration to give the Treasury Secretary the authority to regulate paid tax return preparers. The budget proposal specifically mandates an increased oversight of paid tax return preparers. Paid tax return preparers have an important role in tax administration because they assist taxpayers in complying with their obligations under the tax laws. Incompetent and dishonest tax return preparers increase collection costs, reduce revenues, disadvantage taxpayers by potentially subjecting them to penalties and interest as a result of incorrect returns, and undermine confidence in the tax system.
Taxpayer Advocate Nina E. Olson prepared a written statement before the Committee on Finance US Senate in April 2014, stating, “taxpayers must be confident that federal tax preparers meet basic standards of expertise and competence, and that these standards are maintained over time.”
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Many hope to date a sports star, actor or celebrity chef, but what about a CPA? While not the obvious choice, a relationship with a CPA offer can offer many spin-off benefits that are comparable, if not better than, dating the who’s who in Hollywood.
1. Brains are beautiful! CPAs are among the most intelligent in the dating pool.
2. CPAs know the rules so well they’re good at finding loopholes and making them work for you.
3. CPAs are both teachers and stress-relievers. They help people make sense of confusing rules and terms.
4. CPAs are trustworthy and can handle confidential information.
5. CPAs are not afraid of commitment. I mean they stuck with accounting.
6. Need to calculate a tip? Your date thinks numbers are fun.
7. CPAs are exceptional decision-makers.
8. They’re ethical. CPAs abide by strict accounting standards. If you like playing by the rules, an accountant might be your perfect match.
9. CPAs are always learning and updating their knowledge base.
10. CPAs have moves like Jagger, better yet, Jagger has moves like CPAs. Mick Jagger was once a student of accountancy.
11. CPAs can help fortify their significant others’ financial standing. Date a CPA, and there’s no need to fear being audited.
12. Of course, CPAs can offer tax-season help.
13. CPAs are financially responsible.
14. CPAs will keep their significant others’ best interests at heart when offering financial advice.
15. CPAs are up for a challenge.
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CPA Magazine had an opportunity to sit down with CeCe Morken, executive vice president and general manager of the Intuit ProConnect Group. She described to us the many challenges CPAs face during tax season and throughout the year. One such challenge is the limitation of time. She revealed many CPAs she knows are choosing to solve this problem through automation.
“First of all we hear about time which is, ‘I need more time to spend with my clients,’” said Morken. “Second of all, we hear about ‘growing my practice.’ Those who are successful typically grow their practice by word of mouth which is by far the best type of marketing you could have. But never the less, firms starting out say ‘I would like to be able to find more clients that I can serve.’ The third one that we hear is when it gets really busy.
“When it gets really busy during tax season they need to augment their staff and it’s difficult for them to figure out, ‘how can I find people that I can trust to work with me to serve my clients when I need them,’" said Morken. "I think that’s one of the reasons that you see two things: an increase in people automating things like accounting and tax so that there is more time, the second one is matchmaking platforms that are starting to pop up even in accounting to connect clients who need an accountant or tax preparer with professionals.
“In fact, we’ve done that with Intuit where we match all of our small businesses, we have over 5 million of them, to accountants looking to grow their practice. We can even match them to peers who might have an area of expertise that can help them during the season."
We then asked Morken what she saw for the practical future of accounting?
“Well, I think the practical future is going to change faster than we think,” said Morken. “I think it’s driven by the acceleration of robotics. Robotics can address anything that is rules-based. If you think about accounting functions and tax functions, all of those can be automated robotically. Now, the silver lining that I see to all of that is it will free up an accountant’s time to be more of a trusted advisor to there clients.
“In the future I see us moving into a much more connected world. By connected I mean having access to your trusted advisor wherever you are. When we say wherever you are, mobile isn't about a device, mobile is wherever you have gone. It may be in your car, it may be on your mobile device, it may be from your television or your mirror. Wherever you are, you can connect to your trusted advisor.
“The second piece of connections is we see people coming together in service to the client. Visualize with me, if you will, I’m the CPA trusted advisor to my small business but I know that my small business needs access to capital. I want to bring into this virtual conversation the banker who can help me get capital into my small businesses account or I'm going to help them secure procurement services at a better rate than they can get on their own. I may want to bring someone in to help us with that so it’s a whole connected world. All of this is in service to the CPA being that trusted advisor, but a different type of trusted advisor than they are today.”
Morken went on to describe the power of data and how it can be used by today’s CPAs.
“The final piece that I would add to that is the power of data,” said Morken. “We all see this and know what happens with data today. If we just look at the mega platforms of Google or Facebook and we all see how relevant everything is that comes our way through those channels, they are literally looking at who you get likes from, what ads you look at, what your conversations are like. They are customizing and personalizing that experience directly to you. That same data can help a CPA truly be this really intelligent, guided, trusted advisor for clients where the data comes to them in an automated fashion and we can free up their time so that they can consult small businesses. I focus a lot on small businesses because they are the mainstream of jobs and the economy. The more we can help them survive and be successful, the better it is for everyone.
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While the meat of tax season is over, there may be a few returns that need amendment. So here are the top things to know when correcting a 1040 by filing a Form 1040.
• To amend a 1040, you must file a 1040X on paper. It cannot be e-filed.
• You normally don’t need to file an amended return to correct math errors or attach a document. The IRS will automatically correct math errors and send a form to you for missing forms. make those changes for you. Also, do not file an amended return just because you forgot to attach tax forms, such as a W-2 or schedule. The IRS will usually send you a request for those.
• You can track the status of the 1040X three weeks after filing with: ‘Where’s My Amended Return?’ at IRS.gov or by calling: 866-464-2050.
• If a refund is due from the original return, wait to receive that refund before filing Form 1040X to claim an additional refund. While amended returns take up to 12 weeks to process, it’s okay to spend the original refund while waiting for any additional refund.
• If more tax is due, file 1040X and pay the tax as soon as possible to reduce any interest and penalties.
• Common errors corrected are filing status, income, deductions and tax credits.
• To use ‘Where’s My Amended Return?’ enter the taxpayer’s Social Security number, date of birth and zip code.
• You usually have three years from the date you filed your original tax return to file Form 1040X to claim a refund. You can file it within two years from the date you paid the tax, if that date is later. See the 1040X instructions for special rules that apply to certain claims.
• If you are amending more than one tax return, prepare a 1040X for each year and mail each year in separate envelopes.
• If you use other IRS forms or schedules to make changes, attach them to your Form 1040X.