As the federal government’s partial shutdown attains record lengths and neither side in Washington shows signs of budging on a $5 billion wall along the U.S./Mexican border, tax preparers’ clients seem pretty clear on the issue.
“Clients are inquiring about the shutdown based upon their current position with the IRS,” said Enrolled Agent Janet Sienicki in Schererville, Indiana. “Those who have an installment agreement with the IRS have asked as to their requirement to keep sending in their monthly payment. (These clients must keep their installment obligation or they will default this agreement.) Our tax resolution clients have been asking how it’s affecting their individual cases. My response is quite individualized based on where we are in the process of working on their case.”
“I’ve received no questions or comments of concern from any clients over the shutdown. I believe that they’re not going to be concerned until we get closer to filing deadlines and the process gets slowed down or stuck,” said Don Paul Cochran, a CPA and attorney in Apple Valley, Minnesota. “Most of my clients pay in or just roll their refunds over into estimates. Therefore they have no interest in whether refunds are paid.”
“Actually, none of my clients has talked about [the shutdown] except in the context of Democrat versus Trump,” said Jeffrey Schneider, an EA at SFS Tax & Accounting Services, in Stuart, Florida.
“Turns out some clients who have responded did not think the IRS would be affected by the shutdown,” added said Manasa Nadig, an EA and owner at MN Tax and Business Services and a partner at Harris Nadig, in Canton, Michigan.
‘Daunting challenge’
Many preparers’ functions in dealing directly with the IRS have, of course, become what Sienicki termed “greatly limited.” Clients anticipating refunds voiced concern about delays, at least until the service announced it would pay refunds and process returns when it opened the season and began processing tax returns on Jan. 28 – and issuing refunds on a regular schedule (https://www.taxprotoday.com/news/tax-season-to-start-jan-28-irs-confirms).
“My clients tend to file later than earlier, as most wait on their broker statements. I try to get them in earlier and tell them they can always get me their missing papers later. So for them, the shutdown is not an issue,” Schneider said. “The Tax Cuts and Jobs Act is, as I have many who are employees who took deductions for unreimbursed employee expenses. Under the new law, they can’t deduct them. Though I told them [about this law change] when I prepared their 2017 return, they’re panicking.”
“My concern with the shutdown and the tax software is the delay in getting forms out of draft mode and into filing mode,” Schneider said.
The speed of the passage of the TCJA and other recent tax legislation has contributed to software problems, according to Minnesota’s Cochran. “Passing tax law changes in December that are effective immediately or retroactively means that programming is done on the fly and mistakes happen. With such a major change in many areas, the IRS and state authorities are nowhere near close to giving us sufficient guidance on how to implement the tax law changes to make it reasonable to expect than anyone can know what they’re doing after only a year.
“Then to understand how the tax program has changed and where to look for changes becomes a daunting challenge for preparers,” he said. “We don’t see final versions of the software until we’re expected to use it.”
Other software concerns
Price and security also remain constant concerns with prep software during the shutdown. “The more government changes, complicates (usually through ‘simplification’) or ignores (such as with the failure of states to act on conformity legislation or for both federal and state government to fail to correct problems because of their political agendas) the Tax Code at both federal and state levels, the more it costs for prep software companies to adjust the programs,” Cochran said. “I’ve known preparers who think they can use stripped-down consumer versions of tax prep software to save money, but they’re deceiving themselves.
“We’re forced to e-file tax returns but even the government can’t protect clients’ information,” Cochran added. “The Tax Code requires information to be exchanged in increasing volumes from banks, brokerage firms and so on, but all that information has to be mailed or transmitted to individuals who generally have little or no sense of data security or who get their mail in boxes that anyone can open, assuming it even gets delivered to the correct address in the first place.”
As in previous shutdowns – this is the 21st since the modern federal budgeting process began – the biggest misconception is whether taxpayers should stop making payments on their federal tax obligations. “Some have been erroneously informed that the EFTPS has also been shut down,” Sienicki said. “I informed my clients that the IRS is still offering some services and one of those services, as in past shutdowns, is accepting payments.”
One response is consistent: “Clients must continue to meet agreed-upon deadlines for providing documentation and answers vital to our proper representation,” she said.
