Federal Tax Updates | Tax Planning for 2023: Provisions on the Chopping Block

On this episode Roger and Annie discuss expiring tax provisions, the latest on ERC audits, the resumption of student loan payments, and IRS budget challenges. They provide guidance on planning for changes, spotting fraudulent ERC providers, and embracing technology to thrive as a firm.

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Chapters

(00:00) - Welcome to another episode of Federal Tax Updates
(03:24) - What to watch for in elections and how they might impact the IRS and taxes
(13:00) - Updates on the 199A deduction
(26:33) - Some ERC updates
(27:54) - How to know if you are a dealing with a legitimate ERC Mill?
(33:35) - Keys from the practitioner side of ERC
(42:19) - Updates on student loan forgiveness/repayment
(45:20) - Annie's Scaling New Heights experience
(53:34) - Wrap up and please subscribe so you don't miss an episode

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Annie Schwab

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The full transcript for this episode is available by clicking on the Transcript tab at the top of this page

All content from this podcast by SmallBizPros, Inc. DBA PADGETT BUSINESS SERVICES is intended for informational purposes only.

Creators & Guests

Host

Annie Schwab, CPA

Franchisee Operations Manager at Padgett Business Services

Host

Roger Harris, EA

President at Padgett Business Services

What is Federal Tax Updates?

CPAs, Enrolled Agents, and Tax Preparers can keep up-to-date with the latest federal tax information while earning NASBA approved CPE credits and IRS approved CE credits by listening to the bi-weekly Federal Tax Updates podcast. The hosts Roger Harris and Annie Schwab have over 75 years of tax experience between them, which has been featured in various media outlets including Wall Street Journal, USA Today, The Morning Business Report, Bloomberg Business News, and Accounting Today.

Please Note: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Roger: Well, hello again, everybody. This is Roger Harris, along with Annie Schwab. And we're back for another Federal Tax Updates podcast. And Annie, first of all, welcome. Good to see you again.

Annie: Thanks, Roger. It's been a few weeks, but we are back together and we've got some good content today.

Roger: Yeah, we're we're recording this a little bit after the 4th of July, kind of the hot summer days of all kind of locked us all in. And we've got a lot of kind of less technical stuff. We've got some technical stuff, but it's, you know, the hot, hazy days of the summer. And Congress has gone well. They're getting ready to go home for the month of August and things will hopefully be quiet for the summer. But let's get started. Annie, what are we what are we going to start with and what are we going to do for the next few minutes?

Annie: Well, I thought we'd take a kind of a look forward. I don't know about you, but I've heard a lot about the 2024 presidential election already. The candidates, the sides kind of. Let's talk let's start with what do we need to watch for? What's important to us in our profession as we get closer to the 2024 election?

Roger: Yeah. And the elections are unfortunately, it seems like as soon as one ends, the next one starts and this one is no different. Tax season. Yeah. Yeah. Tax season and elections are similar. There are going to be a lot of things that are going to be impacted by which party controls things, and we're going to kind of go back and forth through this session and talk about some of those things at different times. But but obviously what we have is a system now where the Republicans and Democrats don't see eye to eye on much of anything. And tax policy is part of that discussion. And it will matter who wins the election. So, you know, and I think we we touched on this in one of our earlier podcasts. If you're in this industry, it matters who you vote for. And there are things that will be different. We've got expiring tax provisions that will come up after the presidential election. We saw a little bit and we'll touch on it some of the tax issues that got discussed during the debt discussion. So it's hard now to separate taxes from politics. And that's unfortunate because they don't work together particularly well.

Annie: That's true. We've got the Tax Cuts and Jobs Act that is set to expire. We've also got some subsidies that were part of the Obamacare that are set to expire. And like you said, when the the debt limit bill was passed, unfortunately, that will expire just days before the president is sworn in. So you've got talk from both sides expiring provisions, kind of uncertainty with the debt bill. So it's going to be very interesting for the next couple of months.

Roger: Yeah. And you're already hearing some of the issues like, you know, the you know, it's funny, The Tax Cuts and Jobs Act is now also known as the Trump tax cuts. So that's where politics has creeped in. So you immediately say the Trump tax cuts and people run to their corners and politically. But Republicans are talking about wanting to extend all of that. You know, that that was the greatest thing ever done and we should leave it. And Democrats want to throw it all out. But there really isn't you know, there's parts of it that should probably remain and there are parts that probably do need to go. And then like anything, it's never one or the other. There's going to be something in between. Whatever goes, something will replace it, and that's where the deduction will be. But you mentioned a big one that I don't think many people pay attention to, and that's the subsidies in our health care system. I guess people assume when we pass health care that the subsidies were just there forever, but they're not.

Annie: And no, they were they were intended to be temporary. And then actually during Covid, they got even more generous. So then people sort of got used to to those and they're set to expire. So we're going to have you know, people are going to start receiving notices that their premiums are increasing. And that's like coming in October. So which is, you know, just weeks before the fall midterm elections. So it's going to be on the forefront of the minds of a lot of Americans.

Roger: So and if you look back and it's probably not, there's been so many things that were contentious in Washington, but maybe one of the most contentious things that we ever had was the whole passage of the health care bill and the subsidies. So. And really, without the subsidies, the whole thing probably doesn't work. So I can't imagine how hard of a battle that's going to be. Are the Republicans willing to say, let's take the whole thing down, which they threatened, and they basically do that if they don't fund the subsidies And, you know, the Democrats are going to want to keep them. And, you know, again, right before an election to have something like that. On the radar. It's it could be ugly.

Annie: You know, it's never an even swap. You've always got to negotiate the terms of this and the length of that. And maybe parts of this will make it and parts of that will make it. And, you know, they tweak it a little bit. They throw in riders, they promise different things. And so it's sort of you really don't know what's what's going to come up at all until it's there in front of you.

Roger: So, yeah, and let's remind people again, that's a big part. We've mentioned the Tax Cuts and Jobs Act that's been on the books long enough that a lot of us think that's just the way it's always been. So a quick list of the things that are up for expiration and or renewal or whatever is, you know, tax rates were lowered. That's one of the things we.

Annie: Obviously the favorable tax rates are going to go back up. But another one that some people sort of have kind of given to the wayside is the exemption. We got rid of the personal exemptions with an increase in the standard deduction and that reverts back to the way it was before. So you get your exemptions back, but you get less of a standard deduction.

Roger: So and a big one that'll get a lot of attention. And depending on where you live, is that $10,000 cap on state and local taxes was part of the Tax Cuts and Jobs Act. So again, nothing happens. We get to go back and completely deduct all our state and local taxes. So if you live in New York or California or somewhere like that, you're thrilled about it. Maybe you aren't so thrilled about it. If you live in Florida or Texas where there's no right where you live, where there's no income tax.

Annie: Well, part of I mean, a part of a lot of what I've been dealing with just over the past year is a lot of what's called the salt work around the state and local tax work around depending on states and using flow through entities and all kinds of stuff. So I mean, that could all be again, out the window depending on what happens to the cap.

Roger: Yeah. And there's certain areas where battle battle lines are being drawn. You can kind of see some of the areas. One of the things that really isn't well, it was part of the Tax Cuts and Jobs Act. It's not. And I know we're going to talk about it a little bit more was up in Washington a few weeks ago at a hearing. And I kept hearing about changes to the R&D credit. And that really was a change that was made about a year ago where you lost the immediate expensing and had to amortize it over five years. And and the for business owners that were on the panel with me were all moaning and groaning about that change. And what was interesting there was watching in real time senators from both parties actually agree that now they passed it. So let's let's make it real here. They made the change or they they caused the change to happen. I don't know if they consciously made the change. And yet when all these business owners were complaining about it, they were all shocked that, you know, this happened and they needed to fix it. And yet none of them knew exactly how they were going to fix it because it becomes a negotiating point. So we all agree that we should probably go back and allow you to deduct the full amount of your R&D credits. But what do I get in exchange for voting for that?

Annie: Or how do you fund it or.

Roger: Pay for it or. So that discussion is already out there and could happen even before the end of the expiration of the Tax Cuts and Jobs Act. But and again, we'll talk about it later. But you can also see certain places in the Tax Cuts and Jobs Act where the Republicans are taking one side, the Democrats are taking another one. And that means that at some point they've got to come together and agree on something. Well, they don't, because if they don't, then everything just goes away, expires. It's just we're just back to where we were. And that may sound for some people.

Annie: Huge piece of legislation that, you know, a lot of I mean, there's so much in the tcja. I mean, it affects child tax credit, it affects depreciation, it AMT itemized deductions, QBI deduction. I mean, I mean, it's a massive piece of legislation that has been around and we've been accustomed to and I bet most most of the public is not aware that some of these favorable provisions are set to expire. So no action means they're gone.

Roger: Yeah, they have to come. And that may be what some people are happy with. They may just want to go back to what it was, you know, pre Tax Cuts and Jobs Act and they get their way by making sure nothing happens. I mean, if nothing passes, that that becomes the law again. So and I know we've we've spent some time talking about this on a prior podcast, but it creates the opportunity for us to talk to some of our clients and some of these areas and and at least make them aware of this potential and start thinking about are there actions that we should take sooner than later. You know, while we know what the law is, it's always tough when major tax legislation is being discussed to decide when to do certain things. Do you act on what we know the law is today? Do we wait until we find out what the law is later? Do we flip a coin?

Annie: Because do you have a crystal ball?

Roger: Yeah. So it's, you know, another one that's big and came up, you know, again, when I was in DC is this whole 199 aid deduction. You want to remind everybody what that is? If they don't if they don't remember, because if you work with small businesses, you I'm sure you know what it is.

Annie: But small business, it's a deduction for small businesses. And it was very favorable. In fact, I was reading a an article just the other day and it was talking about how so many entities, if you look at the the ratio of entities like C Corp or S Corp or partnerships, very few are going the C Corp route and more and more going the small business route, which is generally like the S Corp or the or the partnerships. And there have been a lot of provisions in the recent past that have helped small business owners. And 109 A is is one of them. And so that's it's going to come back to the table. It's going to be, I think, a very big negotiating point. It's going to be hard to to know what's going to happen, though.

Roger: And let's remember where it came from. If we remember the discussion and the Tax Cuts and Jobs Act, there was a lot about competitiveness in the US versus other countries. And so they wanted to lower the corporate tax rate to make companies in the US competitive with companies outside the US. Well, that was great if you operated as a C corp, but for Passthroughs where your tax was paid on your individual return, reducing the corporate tax rate didn't do you any good. So no, the Republicans wanted to find some way to compensate passthroughs the same way that they were benefiting the C corp. So they came up with 199 A as the the compromise, if you will. Interestingly, you would therefore assume that all Republicans support the current version of 199 A But if you go back if you can remember back when all this was being discussed, one of the most vocal senators about this need to compensate passthroughs versus corporate taxes was Senator Ron Johnson from Wisconsin. He was adamant that we needed to do something for Passthroughs. When I was in DC a few weeks ago, he was there and he said, Do not assume that I'm happy with 199 A because it did not go as far as I wanted it to. Okay. And so he's not necessarily in the camp of just keeping what we have. He actually wants it to go farther because he didn't get what he wanted the first time.

Annie: So did not realize that. But an interesting.

Roger: Twist. Yeah. So I mean, once this whole topic comes up and this is a big one for our small business clients and and it was it was also referenced, in fact, one of the witnesses at the hearing that was their entire testimony revolved around the importance to them of 199 A. And if it went away, the changes they would have to make in their business and all. Of course, when you're testifying, you want it to be in your favor. So everything that they were going to have to do would have been negative in terms of hiring fewer people, cutting back on benefits, lowering wages, all these sorts of things. But it's going to be a big part of this discussion and it's a huge deduction. I think we're going to touch on that in a future webcast is that one podcast in one of the things I got when I was in DC was some sort of book put together by the Joint Tax Committee, and it was amazing how many dollars 199AI don't know if it generates saves depending on where you're looking at it, but and it's it's going to be a huge battle. And you take away a 20% deduction from our clients. That's a that's big. That's big. And we need to to start talking about that possibility because. But something will come in in exchange.

Annie: Again, interesting times. I don't know, Roger. Sometimes it's just some overwhelming. Right.

Roger: That's why they pay us the big bucks is to keep up with all this. Yeah. Guess I can tell. One other thing and we'll move on that that's going to be discussed heavily in. This is one of the things that the Democrats have have hung their hat on is, if you remember, during Covid, there was a significant increase in the child tax credit, of course, and it went away. And the Democrats want to bring that back. So that's going to be a negotiating chip on the Democrat side to say, okay, if you want 199 A, then we want this or you want the R and D, that's what it's become in in Washington in the sense that you get something. I get something. So the question is who gets what and in exchange for what? So we'll have to watch that. There was and it.

Annie: Always goes down to the last minute and.

Roger: Then be whatever the date is this expires. We probably won't know until the day before what's going to happen.

Annie: I mean, look at the debt ceiling bill. I mean, two days to spare on June 3rd, we had two days they sign the bill, suspends the US government's three point I'm sorry, 31.4 trillion debt ceiling. It's like everybody's watching the news, watching the news all the way. Two days to spare right now.

Roger: And you mentioned the debt ceiling. That's a good point. I mean, this is something that came up that you would think has nothing to do with us and our business or our clients and all that. But it actually did. It did. I mean, if you don't know this, tell them what was in the debt ceiling negotiation that that we will be dealing with. Yeah. Every day.

Annie: So the original everyone talked about the 80 billion funding for the IRS and there was, you know, what are they going to do with it? There are going to be more enforcement. There's going to be more technological improvements. Et cetera. Et cetera. Well, the debt ceiling, the signing of that suspended some stuff or even clawed back some stuff. So like 1.4 billion of that 80 billion came back. They sort of rescinded it. There was some COVID-19 relief funds that had been earmarked to be used further in the future. Those started being clawed back. There's a freeze on all government spending right now. There's discussion about the student loan debt, which we'll get into. But it's it wasn't just let's just, you know, with two days to spare, let's just save the government from reaching a debt crisis. It pulled money from the IRS. And that's going to affect small business owners. That's going to affect taxpayers. That's going to affect our profession. There's a there's a compromise that's going to have to happen when you pull money away from programs that were set in place.

Roger: Yeah, And what it proves is, if you remember and we all heard all the stuff when the Inflation Reduction Act was passed and this funding went to the IRS, you know, all this either celebratory on one side or the world's coming to an end on the other side. And this is awful. There's going to be 84,000 armed people on the street. And it was as if this means this is it, we're stuck with it. And what, less than a year it's already been pulled back. Some of it has already been pulled back.

Annie: And there's going to be more pulled back. They think 10 billion for each of 20, 24 and 2025. So, I mean, it's not just like a one time hit. I mean, we're going to have we're going to see another 20 billion coming off that because remember that 80 billion was over a ten year period period.

Roger: And so so what that means is any time you see one of these things, just because it happens in our political system, what changed was the Republicans took over the House. So all of a sudden now they had control and they weren't before that money that went to the IRS. So they wanted to take some of it back. So but you're the IRS. You're sitting there trying to make plans. One day you got $80 billion over ten years. The next day it's been dropped to less than 60, where, what, less than two years away from an election. So what do you think happens to that 60 if the Republicans take over the White House and the Senate? So how does the agency plan?

Annie: Well, I mean, it's nearly impossible, right? I mean, they have even after pulling back some of the funds, they have said that they plan to move forward, you know, hiring more employees and improving taxpayer service, modernizing technology. They even said that they shouldn't will not have an effect on their audits, which we've talked about. We'll talk more about them in a minute. Yeah, yeah, yeah. But, I mean, it's hard for them to plan, but they seem to be, you know, moving forward with their their short term goals of technology. I feel like technology and customer service and kind of upgrading, modernizing their systems. I think that's on the forefront. Yeah.

Roger: I think what their position is in talking to them is that they recognize that funding is not permanent, even if it's called permanent, you know, in the current state. So what they're trying to do is make as many changes as quickly as they can to try to entrench some of the benefits. So it makes it harder to to cut the money back. Right. Of course, they're not going to necessarily change any priorities because they they say at least that they prioritize customer service. And we did see some improvements last tax season. But quite honestly, that probably came from changes that they made before the Inflation Reduction Act.

Annie: And funding before.

Roger: Hiring and putting some people in place. But I think what the IRS position is, given the the fact that funding is you can call it permanent, but it just means it's until the next election is permanent and then it's back.

Annie: Nothing's permanent.

Roger: Right. Debate. They're going to I think they're going to try to give us a lot of tangible signs that they can be better if you keep giving them the money that they need. And and I'll speak for me. I won't speak for Annie or for Padgett in this situation. I think the IRS is underfunded now. I do, too. They have to spend it wisely, but they need the resources to do their job. And they have been. Those resources have been very tight for the last few years and maybe the last few decades actually. So I think there is a number that the IRS needs. I'm not smart enough to know if it's 80 billion or 60 billion. I don't think I've ever had to deal with a billion of anything. So but I think you're going to see them working to accelerate things that the taxpayer community can see or improvements to make it a little bit, because I honestly believe the IRS excuse me, the Republicans don't think the IRS doesn't need more money. But you don't get elected running around the country saying, look at me, I've funded the IRS. So they're I don't think they would ever take it all back. But I think that it is potentially a challenge that the IRS is going to have to deal with. You know, how do you hire people? And then you have to let them go because you don't have the money to pay them later on. So it's tough. And this is where politics gets in the way sometimes of good government. But I don't think as tax practitioners or small business owners, I don't I think we won't notice things getting worse. We may not we may just not see things getting better fast enough because.

Annie: I think we talked once before. You know, when you have a new hire at the IRS, by the time it's like a seven year training.

Roger: Certain people, I.

Annie: Believe like before, they can actually get into their new role. So, I mean, it's nothing's going to be immediate. I mean, you've seen you've seen strides with the online portals and, you know, id.me and being able to answer your notices online. You know, we've seen a lot of stats about backlog being reduced and phones being answered more. And, you know, all of these these things, I mean, we have seen improvement for sure. But I think it's going to be a while before some of the investment actually is seen by the public right now.

Roger: I think that's why they'll focus on things that people can see answering the phones quicker, which we saw this tax season. They're coming up with some better tools, taxpayer accounts. They're going to try to venture into small business accounts eventually practitioner. So I think they'll focus on the things that are most visible in hopes that no matter how the election turns out in 2024, that they can protect as much of the funding because they have long term plans that is contingent on this funding. But obviously, absolutely they can't spend money and or pledge money and then find out they don't have it.

Annie: So and I don't think the IRS had planned for IRC to be what it ended up to be, right? No, it was a way to get money and save small businesses during Covid and it's turned into a massive fraud area that has pulled so many resources from the IRS to begin these audits and to continue auditing to catch the IRC mills. I mean, Roger, we literally we talk about it on every single I was going to say.

Roger: We you know, we peer into our IRC section of the podcast. So there we are because I mean there's something new or twist every time. And you just mentioned they have started auditing, they've actually started some criminal prosecutions as well. Oh, they have. They have gone after a couple of the bigger fraudsters out there. I don't think they publicized that enough because most people don't know it. But but talk about what's going on with the audits and then we'll talk. I got some stats when I was in DC and oh, great. We'll we'll try to talk a little bit about some of the the ways to to know if you're dealing with a legitimate. Irc provider or not because that's a hard thing. God knows you can't listen to the radio or turn on the TV without somebody, including Mr. Wonderful, coming out and talking about the employee retention credit. How do you know who's legitimate and who's out there just to to rip you off? Because that's the small business owner. At the end of the day, if you get money you're not entitled to, you're the one on the hook for the money. It's not the person who convinced you that you were entitled to this credit when you weren't. It's you. So it's important for for not only the practitioner community, but the small business community to know how to recognize am I dealing with someone that's legit or not? So what's new on your end that we need based on the audit story?

Annie: Little recap here. As you mentioned, it is it is something that, you know, the general public, you know. Is targeted. These males are very aggressive, convincing small business owners that they're entitled to money. Generally, they take a percentage off the top. But if you become involved in one of these and you actually don't qualify, you've got to pay back 100%, even though you only got 80% of the credit because the mill took the other 20%, you're stuck on the line for the full, full amount. And that's just on the tax sorry, the tax payer side of it. You know, the tax practitioner who gets involved in it, you know, it requires amending payroll tax returns. It requires going back and correcting the the business return, the S-Corp return, let's say. Plus, you know, you're filing these things, you're waiting for your money. Do you know you know, did they really qualify as a tax practitioner? You didn't do the IRC, but did they really qualify? Can I continue with this person as a client? I mean, it gets very, very complicated. And we knew the audits were coming and I've seen a copy of a sample audit letter. It's several pages. It will come by mail. You will not receive it via email kind of thing. And it's it'll say up on the top right hand corner, the period for which you're being audited, it'll tell you the form, which is the nine 4941, the amended returns associated with the IRC.

Annie: Basically they're looking for for two things. One, did you qualify and if so, did you calculate it correctly? And so the documentation associated with determining whether or not you qualified for the IRC. And then if you like I said, if you did, how did you get to the number that you you reported on your your return and for the credit. And so they've started they list how I think 16 points Roger of, of documentation that they may request that you should have available during the audit. They put a date. You know, the letter comes and it says, you've been assigned this date and time to confirm or to change, call this number. So I mean, it's very specific. It tells you what format they want, PDF, word or Excel. They don't want you, you know, there's a fax number to send something. There's very specific directions associated with the audits. Now, what we don't know yet is how how strict they're going to be. You know, is it are they more going to be more lenient? Does it matter how much the credit was? Does it matter if it was from a mill or was it something that perhaps, you know, an individual calculated themselves or they used a tax practitioner? So I don't know. We don't have the feedback yet on how the audits are going, but we know they're going. Yeah.

Roger: And the IRS is obviously not going to give us a lot of that information. They're going to keep it to themselves. There's a couple of things that you talked about that are keys that from the practitioner side, you know, one of the challenges that we have and we don't really have an answer to this is that the Office of Professional Responsibility came out a few months ago and said, if your client comes to you and they got their credit somewhere else and want you to amend their return, as the law requires, that if you don't if you believe that that credit was they weren't eligible for it, that you should not amend the return. So all of a sudden maybe your best client who went somewhere else. And that's a whole different discussion as to why we allowed our clients to go somewhere else. But let's just assume they did. But they went somewhere else. Came back with a with a $300,000 credit and want you to amend the return and maybe you told them or you discovered when they come back that they weren't eligible, that according to the OPR, you can't amend that return. So now your best client is trying to make a decision between you and the mill and their obligations. We're hoping to get some guidance from the IRS on really you've kind of put your better preparers in a bad situation and we need some help.

Annie: And because, you know that client can walk down the street and somebody will do it for them.

Roger: Oh, sure. Either because they don't know they're not supposed to or they don't care, both of which are bad. But, you know, they can they can become compliant if they leave you. And so the system in some ways is encouraging people to go to less knowledgeable or less ethical preparers, and that's not good for the system. Another case and you mentioned it in the audits, all the documentations that you have to have if you go to a third party to get your work done, first of all, you should be able to know by the questions that they ask you, are they legitimate? Yeah, true. And secondly, when they finish, what do they give you? Because literally the only thing you have to do is amend a 941 and put a number on a line to get the money. But there's a lot of work papers behind it. Yep. Do are they given to you? Are they furnished to you or do they just say, here's your 941 x congratulations, you're going to get 300,000 in the mail.

Annie: Even if you do have the records, you're still going to have to verify it.

Roger: Yeah, but if you don't have the record, you're dead work.

Annie: Again because you don't have the work. Well, that's even worse because.

Roger: I think I'm correct. In April 15th of 2025, the statute for all of the I.R.S. claims will end. There'll be no availability to apply for ERC after that date. So that date's important for that reason. It's also important that means on April 16th of 2025, a lot of these mills will disappear and they will not be anywhere to be found. So when you need to go to them to get these records that you need to defend yourself in an audit and they're no longer around, what are you going to do? So what I would advise any practitioner or any small business owner, if you're not going to be furnished the complete set of work papers from the party who did the ERC claim do not use that person because you're responsible for those dollars. You're responsible for the calculation. And if you don't have the work papers, you're either going to have to pay again to have someone try to go back and recreate it, or you're going to owe the money. Because again, I said these these mills that are not legit, as soon as they can't get money for you, they're out of there. And so that's one warning signal of of a bad, potentially unethical mill because it's hard to I mean, how do I know? Look, I'm assuming Mr. Wonderful from Shark Tank is very legitimate and he's backing the company behind him that he thinks is doing it properly. I don't think there's any way he'd go on TV and spread false information. But we also know there are people out there who are.

Annie: Absolutely.

Roger: And it's big money. And it's hard for us to know who those people are.

Annie: Well, let's put the practitioners in such a horrible position of trying to do what they're asking to do, serve the client in good faith, you know, complete these claims, amend the returns, and then like you said, the guidance is just so vague. What if it was just you came across just an error and you want to amend? There's not even a way to amend. I mean, what if what if there was a simple honest mistake and you would just like to correct the form? And there's not even a process designed for that? No, you.

Roger: Have to make it up as you go. If you have a client that comes to you and you convince them they shouldn't have gotten the money and they want to pay it back, we're having to figure out on our own how to send it back because they got the money without any expert. Nation. They just changed the 941 line on the 941 and said, send me money. Now we're changing the line again and sending them back money. Do we need to explain why? Or, you know, so yeah, we're all kind of just working in the dark. Waiting.

Annie: Waiting in the dark. That's true.

Roger: And sadly, there's there's not. And again, we all have to go back and remember, this came in the middle of think about where we were when this problem came, which was the end of 2021 or 2020. They retroactively made it at the end of 2020, I believe we were in the midst of the pandemic. Businesses were struggling. Some were closing. We had no idea how long this was going to last. And we were all just trying to do things that we could to to survive. And could things have been done better? Yeah, it could have been thought out better, sure. But nobody had time. But here's a prediction. I don't know how far in the future it'll be, but there's going to be a hearing one day in about, I think, 3 to 5 years where Congress is going to hold this hearing and talk about how much fraud and was in the IRC program and how much money was given out that shouldn't have been. And they're not going to take any blame for it themselves. They'll blame it on the IRS and the small business people. But a lot of this was predictable. And sadly, you know, the Congress first and it was legit. First problem was get the money out. Why is the IRS taking so long to get it out?

Annie: It's the same with the child, the child tax credit. There's fraud associated with that. Any time the IRS is giving out money so quickly, so fast and so much, you know, and so much, here come the fraudsters. I mean, it was begging. The whole program was just begging for somebody to come in and step in and take advantage.

Roger: But the audits are starting. The practitioner community is pushing for more guidance on how to deal with some of these situations we're put in. Try to be good at guiding your clients to recognize a good person who really wants to do one thing to watch for. It's kind of interesting and I was talking to someone the other day, a lot of these companies make the small business owner sign a certification that they have claimed to be eligible, that the small business owner has determined eligibility so that they've kind of say, well, I just did it because they told me they were eligible. So read the documents that you're asked to sign. Ask them what records you're going to get at the end of this. Think about the questions that they ask you. Do they ask you about government mandates or do they just say, how many employees do you have if they don't ask for a list of your employees and their wages, they're not legit. Do they ask about PGP loans? If they just say, give me your 941 and sign this document.

Annie: Run and fast, Right.

Roger: Because they're not going through the research because we know there's got to be a loss in revenue or there's got to be government mandates or there's got to be a supply chain interruption or there's got to be more than nominal impact. There's just certain questions that some of these folks aren't asking, and that should be a clue that those aren't the right. That doesn't mean the business isn't eligible, but this is the wrong person to do the application. So good point.

Annie: So good.

Roger: Point. See, we just we can't make a podcast without talking, you know. Okay, enough.

Annie: With the enough with the If you want more on IRC, go visit all of our other podcasts because there's information regarding IRC there as well.

Roger: Student loans got some interesting information on that the other day. There was there's been a lot of that.

Annie: Student loan repayment. So there are two parts of this. The student loan repayments that had been put on hold I want to say two years and like eight extensions and all kinds of stuff all during the pandemic. Of course they will resume in September. So if you have a student loan and the payments had been placed on hold, those are going to resume. And you're supposed to be getting letters in the mail. On the flip side, there was a discussion of student loan forgiveness, and I think it was $10,000 to $20,000, depending on the source of the loan, etcetera. But this was last week, I believe, the Supreme Court ruled against the administration, and student loans will not be forgiven. So for in order for it still has to go by, it must pass Congress and the president has to sign it. But that's where the Supreme Court stands.

Roger: Yeah. So and again, it's a very big political issue. You hear a lot about it. But yes, the payments will start. The forgiveness was not legal because Congress didn't pass it. You may have heard the president look for another way to forgive student debts. It seems to be that most. Unbiased. People think that that won't pass muster either legally, that for this kind of money to be spent or forgiven or however you want to classify it, it takes congressional action. And ain't no way in today's world the Republicans are going to vote for any student loan forgiveness, whether you think it's a good thing or a bad thing. So, um.

Annie: But it's still heavy on the on the negotiating table. It's you still hear it in the press, the news. I mean, it's still a popular topic of discussion amongst both parties, but.

Roger: From different perspectives. But they both talk about it to, to make them whatever they want to do, whatever perspective they want to talk about. So student loans cannot be forgiven. Payments will start. Um, there's some think.

Annie: It starts in September with the first payment due depending on when your loan payment cycle is. But you know, if you have clients with student loans that have been placed on hold, they're supposed to be receiving the Department of Education is supposed to be sending out notices well in advance to say that the payments will resume, how much it is, how to make the payment, do you need to update your contact information and that kind of stuff.

Roger: And some people have already gone. There were some websites you could go to and anticipation of having your loan forgiven and fill out some forms. So if somebody comes to you and says, But I filled out a form and said it was going to be forgiven, No, nope, nope.

Annie: No, it was I think it was just sort of like a pilot period of being able to see how much you had and how much could be forgiven based on the type of loan that you had. But that website's now shut down, too.

Roger: So because that's not there any you went to an interesting conference in Saint Louis a week or so ago. Tell us about it. And did you learn that of interest to our listeners?

Annie: Yes, it was called Scaling New Heights and it was a 4 or 5 day ish conference in Saint Louis. And a members of pageant went like I said, David Leary was there, but there were 1500 attendees and hundreds of vendors, great content, a lot focused on the future of the profession, taking your practice to the next level by embracing technology, accepting change, focusing on advisory services. It was very forward thinking. It was very motivating. It was a great environment to share ideas, to network, to talk to vendors. And I will say from the sessions that I saw, clearly, I couldn't go to all of them. But it is there are some takeaways that I had based on my experience from that. And the main one is that we are in demand. We know that there staffing issues for accounting and tax professionals, but that, you know, there are people who need us and we are in demand. And due to that, as a result of that, we have not raised our services. We have not valued our services and we're being underpaid. So that's like my one one big takeaway is, you know, like I said, we are in demand. We need to charge for for our services, for our value.

Annie: And while staffing remains a big problem for our for our, you know, business, we need to maybe consider outsourcing or automating or streamlining. And so technology comes into play there. And there's a lot of strategy. There was a lot of conversations about, you know, how to take yourself to the next level even in a time where staffing is difficult. And then on the second, on the flip side of that, there was a lot of talk about work life balance and making you the top priority and your mental health and your family life and setting goals as a as a business owner, where do you want your firm to go? Where do you want to see yourself in one year, three years, five years, ten years? If you're on the tail end of your career, how do you get your firm ready for sale? How do you make your firm show its value to a buyer? So like I said, I mean, it was amazing. It was a really amazing Rodger I had so much fun. I was very insightful and it did bring to light some very specific characteristics of our profession that needs to be addressed.

Roger: Yeah, Well, and and everybody needs to take it seriously because what we're seeing in the industry that conferences like this are addressing and and companies like us are addressing at the same time is, you know, it used to be when it came time and you mentioned selling, it used to be when we sold our practice that there was some multiple of our revenue that drove price, let's just say one times revenue. So if I had a $500,000 practice, one times revenue meant my business was worth 500,000. What you're seeing today? Is that factors beyond revenue are having a huge impact on the valuation of a company. So, yes, maybe you're doing a half, half $1 million in revenue, but your technology is not what it needs to be. Your customer base is all aging. You are the main cog in the business and you're leaving. Your prices are underpriced and buyers are more sophisticated and they're not willing to step in to what you did. They will pay you for your revenue at a greatly discounted price because you've made them make the changes that you didn't make. So there's going to be an economic reality to people who choose to continue to just do things the way we've always done it and ignore the lessons of scaling new heights and others. Because buyers today are valuing business is totally different than it used to be. It used to be what's your revenue? And again, we'll put some factor one, one and a quarter something to it. That's the price. That's not the way the world is working anymore because today's buyers aren't willing to go through what we went through to build that business and we're not going to accept an out-of-date practice and pay based on a multiple of revenue.

Annie: And buyers are not going to work 80 hours a week all the time, you know, 12 months a year there. That is just not what the the up and coming, you know, small business owners. That's not what that's not their focus. They want work life balance. They want flexibility. They want, you know, perks and innovation and technology and, you know, to be able to work from wherever and and price for their value and not for, you know, hours at a rate. So you really have to take a minute and look at the firm.

Roger: It's the real challenge of our time and our profession. It was always there, but I think Covid just kind of brought it to a head and and made it more. First of all, we had to make some changes and we said, Hey, this ain't all bad remote work and things like that. So it's it's something that if you're in the profession, you really do need to, to address this. Now, Andy and I touched on a podcast. We did a podcast and touched on this earlier that I will commend to you going back and listening to. But also let me put a plug in, go to Paget advisors.com. We've just done some webinars on this. We've got some discussion that Jeff and I did just recorded yesterday. It may not be well, I don't know when you're listening to this, but hopefully by the time you get there you're going to need a partner to help you with this, whether it's the people at scaling new heights, whether it's Paget, whoever it is. But what you can't do is do nothing because at the end of the day, you're going to pay for this one way or the other. You're either going to make the changes and reap the benefits and have the firm that people are bidding on or you're going to have you're not going to make the changes. And when it comes time to retire, you're going to have to take a greatly discounted price and, you know, pay for the changes you didn't make. So it's really, really I think what we all need to focus on, we all spend time learning the tax law. Let's spend the same amount of time learning how to make our business better for us and better for whoever buys us.

Annie: So I like it. Roger.

Roger: I like it. It's it's, it's it's, you know, we don't like changes, but we got to make them.

Annie: Yeah, nobody likes change, but. No, but these changes are good. I mean, better work life balance, higher value for your firm upon sale, you know, attracting the right talent to your company. All of those are very positive changes. But changes change takes effort, time, commitment takes time.

Roger: And it takes it might take some money, but it really takes a commitment more than anything. If you commit yourself to making these changes, you'll find a way to do it. And actually, I think if you do it right, you can have a better firm and make more. It just does not mean you have to sacrifice money. You can actually make more money in a better environment. That's why it's worth more when it comes time to sell. So yeah, yeah, but but you can't do it overnight. You got to start the process.

Roger: So it's a.

Roger: Process. Go to Paget advisors.com look there go to our podcast that Andy and I did listen to that call us go to scaling new heights but don't ignore it. That's the only mistake you can make is to act like you're going to somehow not be impacted by this because we all are. Anything else, are we? I guess we filled in a lot of stuff for a slow summer.

Annie: I know, I know. No, I think that's all that we have for today. We will be doing additional podcasts, topics to be determined. We'll kind of see what's what's happening in DC and what's going on. We'll continue to follow the elections, clearly follow IRC and bring you anything that is new and important and interesting. So tell your friends like us, share us and come back and hear us again.

Roger: Give us some suggestions and we'll try to take them wherever you want us to address if we think we're qualified. So. All right, Andy. Well, stay cool out there. It's it's summer. It's hot everywhere, I think. Well.

Annie: Yeah, stay safe.

Roger: All right. Thanks for everybody for listening. And we hope to see you soon on another Federal Tax Updates podcast. Bye, everybody.

Annie: Bye.