This is my 19th year as a tax professional. By far, this past Tax Season was the worst of the nineteen I’ve experienced. Why? Well, there were a multitude of reasons.
First, I had a personal issue that impacted my family. For me, that was a top priority, and it caused me to miss about ten days of work since the new year began. I don’t regret that in the least–my family is important to me. Still, the timing was poor (to say the least).
Second, tax reform. My clientele is primarily self-employed individuals. Almost all of them were impacted directly or indirectly by reform. While there are no state tax issues for Nevadans, we specialize in industries rather than a geographic location, so we had to deal with lots of differences for state taxes.
Third, tax software this year was far ‘buggier’ than in prior years. Tax reform was the culprit. Many new forms were not released until 2019, so software companies had no idea how to write their code. And when Tax Season began on the normal date, that meant there was less time to test the software so we (tax professionals) were basically working with beta software.
This was especially true regarding the Section 199A deduction (the Deduction for Qualified Business Income). For simple cases, the deduction is the lesser of 20% of business income or taxable income. For most (but not all) of our clients, we knew what the deduction should be (and the software got the answer correct). However, when taxable income exceeded the income threshold ($315,000 married filing jointly, $157,500 for others), the calculation becomes far more complex. Almost all of these clients are on extension, but we did have a few clients where I had to double-check the software as I felt it was not calculating the deduction correctly. That definitely added time to our workload.
Fourth, tax reform increased the number of clients who qualified for the Child Tax Credit (or the Credit for Other Dependents). These require an interview–and an interview taxes time. It’s only (on average) three minutes a client, but if you add 100 more clients needing this interview, that’s 300 minutes or five hours lost.
Fifth, tax reform implemented due diligence interviews for clients filing as “Head of Household.” That’s a minimal number of our clients; still, that’s probably another hour lost to interviews.
Sixth, explaining returns to clients took far, far longer. The new postcard-sized forms are a joke. With the old Form 1040, arithmetic worked. If line 39 was the sum of lines 37 and 38, you could just see the result. That’s not the case any more. In various places, you have to know that a + b will not equal c, because you have to add in (say) the result of Schedule 3, too.
Seventh, withholding tables were adjusted in 2018. Many taxpayers were expecting their normal refunds got smaller than expected refunds. This was not much of an issue for our client base (again, we deal primarily with self-employed individuals) but it did have some impact. We will check the withholding for any of our clients who wish this done, and we did notify our clients last year of this issue.
Overall, we estimate each return took, on average, ten percent longer than during the 2018 Tax Season. That doesn’t seem like much, but a few minutes here and a few minutes there, and sooner or later you’re talking lots of minutes gone. In speaking with other tax professionals I heard much of the same thing (returns took longer this year than last). I like what I do (yes, there are people who like being tax professionals) and have no plans to change, but this was the first April 15th where I wondered about when I’ll retire. I feel less of that today (fifteen days after April 15th).
There were some light moments this Tax Season. First, it snowed in Las Vegas! Yes, it really did.
The view at my office. Am I in Chicago or Las Vegas? pic.twitter.com/SvloI54Evm
— Russell Fox (@russcfox) February 21, 2019
Then there was the unnamed individual (not a client) who told me that I was wrong, and professional gamblers can no longer deduct business expenses. He had read our new book and just knew that the tax reform bill changed the law about deducting business expenses. (By the way, a professional gambler can still deduct his business expenses. What changed is that he can no longer take an overall loss based on his business expenses.) When I told him he was wrong, he started arguing with me. I asked him if he was a licensed tax professional, or had some other background in tax. When he said no, I suggested he read the new law or speak to a tax professional. He said that two of his friends knew more about tax than any tax professional. If you’re wondering how bad information spreads, wonder no more.
We have a lot of clients on extension. If you’re one of our clients on extension, do not wait to the last minute this year. Returns are taking longer, and those deadlines are meaningful. We don’t mind you sending your work to us piecemeal; that will mean less has to be done later. I strongly suspect that there will be individuals sending us their returns to start in October whose returns we cannot complete in time.
Tags: 2019.Tax.Season