Tax professionals feel a strong sense of purpose and a positive impact on their communities in helping clients deal with their taxes, according to a new survey.
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When they were asked, “What do tax and accounting professionals consider the primary sources of purposeful social impact of their job?” 30% of the small firm and independent tax advisors cited job wealth and creation, while 25% of the in-house tax and accounting pros surveyed pointed to having a direct impact on society.
“More than 90% of legal and tax professionals say their work provides them with a significant sense of professional purpose, which suggests that the work itself is closely aligned with their personal values and beliefs,” said the report.
Tax professionals are helping clients get through what promises to be a stressful tax season, given the impact of the ongoing pandemic and the changing tax rules surrounding items like the enhanced Child Tax Credit, the prematurely expired Employee Retention Credit, and the backlog of unprocessed tax returns and amended returns still left over from last year at an overwhelmed IRS.
The survey also polled law firm attorneys, 99% of whom also felt their work gave them a strong sense of purpose. “Although a high percentage of both legal and accounting professionals reported that their work gives them a significant sense of professional purpose, the reasons differed between the professions,” said the report. “In both cases, however, a professional sense of purpose was connected to the degree and manner in which these professionals felt their work had a broader social impact on their communities and society as a whole.”
In addition to income taxes, tax professionals have also been helping their clients with indirect taxes like sales and use tax, as well as dealing with tax audits. Increasingly the IRS and state tax authorities have been using the information reporting forms they receive from third parties such as merchants and credit card companies to match them against the income tax forms that taxpayers are filing as a way to do automated compliance checks.
“I call it the tattletale of our economy,” said Ray Grove, vice president of indirect tax at Thomson Reuters. “It does a really good job of closing the tax gap with the 10 series forms and an expansion of that. That’s the federal government’s response. The state government’s response is really part of the remote seller’s taxes, and making sure that they’re auditing folks and individuals in those areas. This is one of those things where so much of our economy flows through those means, and a lot of people aren’t appropriately facilitating or managing that. What tends to happen is when the federal government starts expanding their federal reporting for 10 series forms, what states will do is they start expanding their reporting and withholding requirements as well. If you play that over the long term, if you’ve got gaps and you have issues there, those 10 series forms are oftentimes what the states use as a backbone of identifying individuals that they should be looking at closer for audits.”
Tax pros are also helping clients who have moved out of state deal with compliance issues. “We have quite a number of taxpayers that have discovered there are special rules for people who are telecommuting or working remotely that is different from the state in which they normally work,” said Robbin E. Caruso, partner and co-lead of Prager Metis' National Tax Controversy Practice. “We frequently have a client that lives, for instance, in New Jersey and is working in New York. They’re taxed by New York, and they get a credit for the tax they’re paying to New York by New Jersey, and that’s what they’re accustomed to having. Now what we’re experiencing is because of the pandemic many people have relocated. They’re working from other states where they have secondary homes and vacation properties, and they’ve rented out homes and moved to other states. They’re finding themselves subject to dual tax for unearned income in some instances where they have spent more than 183 days and perhaps became a statutory resident of another state, or where they’re sitting and working in another state that says, ‘You’re sitting in my state and working in my state. Your income is subject to tax in my state.’ And the other state says, ‘Your employer’s business office is located in this other state and you’re subject to tax here.’”
She is seeing more states trying to claim income taxes from people who work across state lines. “I believe that most states due to financial issues and distress incurred during this pandemic have become more aggressive than they were prior to the event of COVID starting,” said Caruso. “They’re examining and reviewing how people are reporting and filing their taxes, both individuals and businesses.”
She believes taxpayers should work with tax professionals to help them deal with complex cross-state tax issues that could subject them to stiff penalties and back taxes. “A taxpayer always has to carefully consider what states they have filing obligations in, be it an individual or a business, and make certain they’re timely filing accurate income tax returns, filing extensions timely, making estimated tax payments due timely in order to avoid significant and unnecessary penalties and interest that may not otherwise have been incurred had they filed appropriately,” said Caruso. “A real warning to taxpayers is that the statute of limitations is never running for a tax return or a form filing that was required and was not filed, so if you have not filed a tax return, the statute is open. There is nothing running, so should another state come along and assert a claim against a taxpayer that they have a filing responsibility for a prior year, particularly if it goes back a number of years where you haven’t filed, you can actually find yourself in a position such that you would actually owe taxes, penalties and interest to the second state, and it will be too late to claim a refund from your resident state. You will have already paid and reported this income and paid tax on it to your resident state, but you can no longer get or obtain a tax refund if you’ve gone past the statute of your resident state for receiving a refund. I’ve seen that happen with significant dollars into the millions.”
