Tax Season Reflections

Roger and Annie review how the 2024 tax filing season went, discussing improvements in IRS customer service metrics but also lingering issues like postal delays. They cover key post-filing topics like evaluating firm performance, addressing remaining extensions and IRS notices, and navigating complex new requirements like beneficial ownership reporting. They also provide updates on the Employee Retention Credit program amidst ongoing fraud concerns and talk about preparing for future tax policy changes after the election.

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• (00:00) - Welcome to Federal Tax Updates
• (02:14) - Post-Tax Season Reflections: IRS Performance and Technological Improvements
• (08:22) - Evaluating the Tax Season: Metrics and Client Feedback
• (14:14) - Addressing Post-Tax Season Tasks and Planning Ahead
• (23:11) - Navigating New Developments: Beneficial Ownership Reporting
• (25:37) - Navigating the Complexities of Court Rulings and Association Memberships
• (27:12) - Congressional Attention on Implementation Issues
• (28:11) - Exploring the Details of Beneficial Ownership Reporting
• (29:01) - Challenges and Legalities for Tax Practitioners
• (32:59) - The Ongoing Struggle with ERC Claims Processing
• (33:53) - Fraud Prevention and the Importance of Accurate Record-Keeping
• (36:35) - Addressing the Surge in Fraudulent Claims and Ensuring Compliance
• (40:10) - Legislative Updates and Future Tax Policy Discussions
• (42:38) - Security Concerns and Protecting Client Data
• (47:18) - Wrapping Up: Post-Tax Season Reflections and Looking Ahead

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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.

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Roger Harris: Hello, everybody. Welcome to another federal tax update podcast. We're recording this after April 15th. Well, so nobody can hear it until tax season is over. I was going to play a special song to welcome Annie back, Welcome Back Kotter intro. But then I heard that I might break all kind of copyright laws and as cap laws. So, [00:00:30] Annie, I'll just officially I won't sing to you, but welcome back.

Annie Schwab: Thank you. I it's glad to be back. I missed you guys.

Roger Harris: We all missed you. And we I know you were busy and doing other things, but it's great to be back with you. And, uh, now that it's post tax season, I guess we need to talk about some things that aren't related to being in the middle of a busy tax season and maybe how to judge your tax season. What could be lying ahead? And I'm sure [00:01:00] we'll talk about IRC because we always do. You know, we always talk about IRC when you weren't here. So I don't know if.

Annie Schwab: Oh no okay. Well yeah make up for it today.

Roger Harris: We'll make up for it. So Annie welcome back. Why don't you start us off and talk a little bit about even though tax season is over, it's it's a good time to kind of see how we did, how the IRS did, how everybody did. So yeah. What you got.

Annie Schwab: Well it is over. It is over for the first set of deadlines. [00:01:30] Um, it's never really over. I always feel like no get past the spring and then the fall busy season comes and the next thing you know, you're back in the spring. So, um, I will say this year to me felt a lot smoother, um, a lot less, uh, issues with delays and forms and stuff. Um, I do, I do like to look back. I like to compare, you know, the prior year to the current year, um, looking at some metrics. And that's basically what the IRS does too. So [00:02:00] I will say the IRS is toting their horn this year. Um, they had some significant strides with technology. Um, they've had a lot more usage with the website. Um, but other than that, comparably, you know, it's very similar number of returns that were received, returns processed. Um, the average amount of refunds went up like 5%. You know, same number of people waiting for their check versus direct deposit. Um, so [00:02:30] it wasn't like nothing jumps out at me as super shocking. Um, I like I said, I think the biggest hurdle was, you know, improving their website usage and their customer service, and I do. I personally saw an improvement. Others have have said they also saw an improvement. And the IRS put out some, some stats basically. So they said the quality. So like their phone service, the customer service, the quality. Get this. During the pandemic [00:03:00] it was 15%. That was the the quality of the service. Last year was 84 and this year is 88.

Annie Schwab: So you can see you know they've come a long way since the pandemic. Um, but we're even seeing improvements from last year. So that's that's a good sign. I mean they needed to and hey faster response times. We saw a little bit it went from uh it went down four minutes. So you had a four minute less wait. Um, the average was a 28 minute wait. [00:03:30] Um, we had some more calls answered. They did higher. The IRS was hiring, so more more people actually picked up the phone. And they although they still had the implemented the callback feature where you could say, you know, press one and get a callback. Um, and I think that has helped and has also been improved. I think last year there was some well, they said they call me back in four hours and it was the next day or something like that. Um, so I guess with with more manpower, you get, you know, the phones answered. It's good to see the quality [00:04:00] of the responses going up. Um, they had a lot of centers that to help people prepare their taxes, that stayed open later in the evenings. There were some that were even open on Saturdays. So, I mean, those were to me, those are good, you know, strides. Um, and I think maybe, maybe if as long as that trend continues to go upward, I see now they're even talking about putting out more like tech uses on their website ways to get portals client information. So I hope that does come into [00:04:30] play in the next year or so.

Roger Harris: Yeah, I think, you know, this probably was the best post Covid tax season. Oh yeah. Um, had fewer special things that we had to deal with. You know, a couple other things that are beginning maybe to kick in that helps the IRS, as you mentioned, they're trying to do more things, um, without human interaction. You can scan documents, upload documents to the IRS. Uh, hopefully more practitioners [00:05:00] and taxpayers are setting up online accounts and maybe some of the things they were calling for they can find in those accounts. So hopefully this is a. A pattern of gradual improvement. As you mentioned, they they've gotten some money to to hire some people. Ultimately that seems to always be important. So yeah, I think, you know, and you know, it's anecdotal because we don't know every software. But, you know, even the software providers seem to have better years this year than they did, uh, in [00:05:30] the past, though, I, I think H&R block's desktop product had a problem. On April 15th, I saw that, which couldn't have been fun for know.

Annie Schwab: That was unfortunate.

Roger Harris: Anybody trying to to find the one interesting thing we've seen, I don't know if this is a nationwide problem, but or if it's just around here, but we've had a huge problem with the Postal Service and, um. They built a brand new facility in Atlanta, and that was supposed to make things better, [00:06:00] and it's made it worse. So we've had a lot of phone calls about people who mailed to the check instead of having it withdrawn, and it hasn't shown up out of their bank account yet, so nobody knows where it is. I want to know whether to stop payment and issue another one or what happens. And, uh, we don't know where those things are, but the Postal Service and it created some headaches where, of course, people were mailing information in to to the tax preparers, and it was taking weeks to get somewhere when it should have taken [00:06:30] days. So some things got better and the Postal service got worse. And because they got worse now they need they're asking for another rate increase. So we'll see how that works.

Annie Schwab: I haven't heard that out here in Texas, but um, hopefully Atlanta will get it together.

Roger Harris: Yeah. And you know, unless you were mailing checks now again, some states, you know, have different processes for electronic payments. And sometimes people say, I'd rather just mail a check. It's too difficult. Uh, the IRS [00:07:00] is pretty good about it, though. You tell them to take it out. They they they're pretty good at that. They'll take your.

Annie Schwab: Money any time.

Roger Harris: Get the money. But I know here in Georgia they'll put money in your account, but they won't take it out of your account directly. You have to go through their website and set up. So some people say, well, I'll just mail a check. And then the check floats around for who knows how long before it shows up. So but, you know, all things considered, uh, at least from the IRS standpoint, the software standpoint, I'm [00:07:30] sure our clients were the same as they always are. Uh, they don't send change. But, um, how do you think firms do or how how do we judge if our firm did better? Because we're we're obviously a factor in how tax season goes. What what would you tell somebody to look at. And right. So we can make a judgment how we did. Right.

Annie Schwab: We we I generally follow some common metrics. Um for example you know how many returns went on extension. How many got filed. Was it you know, the [00:08:00] ten 40s was the business, those kinds of things. Um, so extensions by type, returns by type, how how they were filed. I look at pricing to see, you know, for the most part, similar returns from year to year. Did you increase your pricing? Did you increase it enough? Um, were you working longer hours? Were your staff working longer hours? Um, how many staff did you have this year compared compared to last? How many hours were worked perhaps on remote or were they on site? And there's plenty, plenty, [00:08:30] plenty of other metrics you can say. You know how many clients new clients did I bring on? How many clients did I add? Services. So maybe you have a couple of tax only clients that now you're doing the accounting or the payroll for. So all of these metrics, in my opinion, really help you understand where your improvements are and perhaps where you need to focus before the next tax season comes around and you know, you're still in the same lull. Um, those [00:09:00] are the main ones that I mean, obviously revenues and collections and are and things like that. Um, perhaps this is the year that you invested in new technology or new software compared to last year. So, I mean, looking at the firm's expenses and income as well as the, the business side of it, meaning the, you know, number of clients, number of hours worked, types of things, it's important. Yeah.

Roger Harris: And now's the time to do it because it's fresh on everybody's mind. You know, in terms of, uh, how April 15th went, depending [00:09:30] on how many employees you have, make sure you get their feedback. Oh yeah. You may have a completely different impression about how certain things went than the employee who's kind of more on the front lines for some things. And yeah.

Annie Schwab: I suggest every after every tax season, or maybe you do it at the end of the calendar year, you know, thank you for being a client. Merry Christmas, happy New Year. Uh, but at some point during the year, I really strongly recommend that you capture your staff feedback. [00:10:00] Survey them. If you have a large group, have a meeting, take them to lunch something. Gather feedback on their experience. What went well? What did they struggle with? Do they perhaps need additional training? Do they need, you know, new monitors like talk to them and see where are they struggling? And the same thing on the client side, you know, identify their level of satisfaction. Are they planning to come back and if so, great. And if not, you know, find out why. Um, identify opportunities. So like I said, you know, if you have tax only clients [00:10:30] but you've identified that, oh, they could really use some accounting or some some payroll or advisory, um, get their feedback, find out what their short term and long term goals are. Find out if there's something that they want that perhaps you can meet their their needs. Um, of course opportunities for referrals. Um, those are always important. I think some of the best clients come from referrals. Referrals of your existing. And clients. So things to think about. It seems like you just want to, you know, be done [00:11:00] with it and go to the beach for the summer or something like that. But it really is important information. I think you can make critical decisions in your business based on the feedback you get from your staff and your clients.

Roger Harris: Yeah, and we mentioned a minute ago clients don't change a lot and they don't I mean, some some do, but they don't. So, you know, there also may be clients that just don't fit for you anymore and you might as well go ahead and and first of all, again, staff can have input here as well. If you [00:11:30] believe that you need more time back to get better clients or to spend more time with family, whatever the case may be, go ahead and identify those clients now and don't wait till October or November to tell them they need to find someone else. Go ahead and and give them all the time they need to to make arrangements for someone else. Because again, they've been your client for at least one year, maybe some for many years, but sometimes [00:12:00] their fee doesn't grow as fast as their demand for work does your specialty, or they've come up with something that doesn't fit your specialty. So don't forget to look at clients during this process as well. And if there's some that just really aren't going to, uh, fit your long term plans, go ahead and let them know now.

Annie Schwab: And and if you have a referral, if there's, you know, maybe someone in your area that you would suggest there's there's nothing wrong with offering, you know, a referral, perhaps you'll get a referral from [00:12:30] them in the future.

Roger Harris: Right? Right. Particularly if it's something that they've grown into needing a certain level of expertise that you don't have. And you know someone that has those and again, vice versa, you may have an expertise that, uh, that they don't have, and they'll have clients that need to come back to you. You know, we talk about April 15th as if it's a deadline. I know, you know, you know, I'm a big sports fan, so I don't know for firms if April 15th is the end of the first quarter, halftime, [00:13:00] the third quarter or the end of the game, I think it's very rarely the end of the game. It's somewhere between the first and third quarter, depending on, uh, what still has to be done. So talk about what I mean. There are things that still can be done and need to be done. Obviously once April 15th is is arrived. So what are some of those things and what would you learn from this tax season to start doing now? Uh, for some of those remaining tasks. [00:13:30] Well, sure.

Annie Schwab: And the most obvious is extensions, right. Um, there's extensions to file. Remember those are not extensions to pay, but there are clients who get, you know, forms late or get you data late. And so you have those on extension very normal, um, common practice and most firms actually. But what happens is I feel like you come out of April and like May is kind of wishy washy and then June, well that's beach time. And then July comes and before you know it, you're like pushing up against [00:14:00] those fall deadlines. So don't don't, you know, take a breather for sure. But don't let them linger on. Don't let the clients get comfortable without responding. You know, if you're waiting on something, they need to make sure they're getting it to you so you can get that return out the door and get paid for it. And so that that's that's the most obvious one. Um, there are other things. So during the tax season, maybe you noticed clients who, um, under withheld or didn't make the proper estimated tax payments. Those are [00:14:30] discussions that you can start addressing now to prevent underpayments and penalties and interest for next year. As always, we've got IRS notices that come out. I will say the IRS, there's a web page, um, that if you just go to the IRS website and do IRS notices, it lists all the different types of notices, what they actually mean, um, common ways to respond. It's actually very helpful. Um, you'll see those, you know, matching notices you probably see quite often, but there's some weird ones [00:15:00] that come in and you're like, what? What is this? Notice number one, two, five, six, six, you know, and you're kind of sitting there.

Annie Schwab: So, um, the IRS website is a good place for that as the notice, you know, if you get a notice, don't wait. Don't sit on it. Um, try to address it as quickly as possible. So that's another one. And then there's some that you can sort of things that come up throughout the year, especially if you have accounting clients. So let's let's think like entity selection. You know, is it time for them to make, you [00:15:30] know, the selection. Um, are they downsizing and, you know, perhaps the partnerships dissolving and it's going to go to a sole prop or something? Um, those are kinds of things that you learn through the communication and the interaction with your clients. So just, you know, maybe identify some that you think, oh, maybe it's time to talk to them about making an selection reasonable. Comp is another one. So if you've got. Out a lot of shareholders, make sure they understand the concept of reasonable [00:16:00] comp, and if they are maybe not taking enough, let's correct it now in this year and not be addressing it again at year end. Same with guaranteed payments for partners. That's another really big kind of misconception of how the partners get paid. Um, so, you know, fix those things or have those conversations early in the year to prevent, you know, and all of this is billable services. So these are all ways to make some more money.

Roger Harris: So you have to do it for free.

Annie Schwab: No. [00:16:30]

Roger Harris: And you know, extensions I think there's two ways to look at extensions. There's returns that we had the information we just have time to get to. And then there's returns where we're waiting on information. And those are different issues. So absolutely. Um, particularly if you're waiting for information. You know, go ahead and start and say, come on, let's let's get this in here and set a deadline. So you don't want to run up against another deadline and have the same, same problem. If it's information that you had it all, you just couldn't get around to it. I think you want to go [00:17:00] ahead and knock those out because like you said, if you didn't hit the number close enough on the amount of tax that they owe. You want to minimize any penalties and interest that the client might feel like is your fault because you didn't get around to it, you weren't missing anything, and somehow in your extension, you didn't get close enough on the taxes due. Another interesting thing that I think, and I don't know if this is going to kind of one of these two wells, maybe self-correct, the other one won't.

Roger Harris: And [00:17:30] talking to other, uh, practitioners, it seems like balance dues were a little greater. And in some instances, fewer clients got refunds. And it seems like there's two issues that that caused that. Number one, for the first time in many years, a lot of our people had more investment income. Interest rates were higher. They were earning more on their savings accounts. Dividends were higher. Um, that may or may not repeat itself next year, but a big one is, uh, under [00:18:00] withholding, uh, the W-4. Yeah. That crazy W-4 that we got away from what we all used to know, you know, married, single. How many people in the household and people working multiple jobs, changing jobs from the pandemic? Uh, that under withholding problem is not going to go away, uh, just because it's another year. So, um, for people who had a surprise, either in smaller refunds or balance dues and you can peg it on that withholding. You mentioned [00:18:30] we you know, we should really look at that because we may just beginning but but beginning to see that problem and I'm not sure it's going to go away.

Annie Schwab: No, I'm I'm not a big fan of the new W-4 myself. Um, I find it. Well, nobody really likes change, and I understood the first one a lot clearer. So this one's a little bit more challenging for me. But it's I mean the notion is there. The idea is there might just need some tweaking with some, some clients to get it, to get it right. [00:19:00] Um, you know, there are a lot of people out there that would much prefer to be getting a refund than have to write a check. And so, you know, you see the same thing you see over withholdings all the time. And you're thinking to yourself, why are they giving the government money and then getting it back in April? But you know, you have to understand the client, the the way they operate. You know, having a balance due can be like.

Roger Harris: Their mentality, how how they think about it, how they want to approach it. Because now you can really earn money on a savings account for the first time. So [00:19:30] you can, you know, giving it to the government interest free, you know, didn't really matter too much a couple of years ago. Now it it could matter a couple.

Annie Schwab: Of dollars now.

Roger Harris: Yeah, yeah. And we'll talk more about it later. But you also if you have business clients may need to be developing your strategy for the beneficial ownership reporting. We'll come back to that. But that's here for now. Again we'll talk more about it. So what is your strategy and what is your approach towards that with your small business clients? Okay. Anything [00:20:00] else on, um, tax season itself?

Annie Schwab: No, I mean, I, I was pleasantly surprised. I do encourage everyone to take some time. Um, relax, maybe go on a trip, spend some time with family and friends, do something you like, get refreshed. But, um, taking sort of a look at what went well and what what maybe struggles you had or challenges and addressing them head on before that fall tax season comes into play and the next thing you know, [00:20:30] you're you're back in the spring fighting the same battles. Um, it's it's sometimes you don't think it through, um, in the moment, but I think it will make a big difference.

Roger Harris: Yeah. Well, since we mentioned it, let's go ahead and address, you know, because things did happen while you guys were all buried in in tax season. There was a couple of, uh, well, one major, uh, development as it relates to beneficial ownership and. Maybe [00:21:00] some subtle kind of background, um. Potential changes. Talk about what happened, uh, in early March that has at least some businesses in a different position than others, of course.

Annie Schwab: Um, and so we're talking about beneficial owner information reporting requirement. Again, this was something that came out from FinCEN. It's not something like a it's not part of your tax return. It's not through the IRS. Um, it's basically focused honestly on small business owners [00:21:30] and getting information to prevent, you know, fraud or over laundering.

Roger Harris: Which is what they're they say it's supposed to catch. Right?

Annie Schwab: And I do I honestly do think that the intentions were good. Just the semantics of it all is kind of difficult. Um, it requires a lot of, of reporting, um, using the FinCEN website. And so there was a court case in early March. This has been around a while. It it's been [00:22:00] like two and a half years in the making, but not much information came out. And now now we're here as of January of this year, um, the law is currently in place. Um, but there was a federal district court in Alabama actually held that the boy was unconstitutional. And so the Justice Department actually appealed that, um, it was a very short, brief notice of appeal that was filed with the 11th Circuit. Um, and so that [00:22:30] sort of opened some eyes, um, maybe broad, a little bit more chatter or brought it more into the discussions in DC and with AICPA in particular. Um, just sort of like, okay, this is really here. These penalties are high. There's even jail time. Um, small business owners don't know about it. They don't even know they're supposed to be doing it. Who can help them do it? Is this like practicing law and it should be with an attorney? Or is this something that tax practitioners can help [00:23:00] with? So many questions. Kind of unknown territory here and so. Well Roger, where are we now?

Roger Harris: Well, one thing the court case was limited. It was brought by one of the national business associations. I don't remember it right off the top of my head. And so the ruling only impacts members of that association, and it only impacts members of that association up to the date of the ruling. So you can't go join it. Join it. Yeah. [00:23:30] And get exempt. You had to be a member at that point. But it created this two tier system. Now where we have a group of businesses that are a member of an association where a court has said they don't have to comply because it's unconstitutional, which just creates this whole what in the world's going on here? Now, this business would have to do it. And one right next to them because they didn't join an association wouldn't. That doesn't make sense. That's not fair. Along with what I think is has [00:24:00] been I'll say this from my opinion Fincen's lack of desire to listen to the practitioner community because let's face it, this applies to clients. I mean, businesses with fewer than 20 employees and less than 5 million in sales. We do a lot of work with that group, and I'm sure a lot of our listeners do, and you are their primary advisor. If you don't tell them about it, they'll never know about it.

Roger Harris: And FinCEN has been reluctant to listen [00:24:30] to our concerns and listen to what we're saying about this implementation that probably isn't working as it should. And yet it's here. It's on us. And unless you're a member of this association, it's still on you. But finally, it appears that Congress is starting to pay attention now. They passed it, so they're kind of caught between a rock and a hard place to they. They want to say the bill was perfect, [00:25:00] but the implementation is bad. So they don't look bad for voting for it. But FinCEN looks bad for implementing it. So there are some some people now wanting to hear about the implementation problems. In fact, uh. It's kind of irrelevant because I don't know when you're listening to this podcast, but a week from tomorrow, the House Small Business Committee is actually holding a hearing on the implementation of the Voy reporting. And and I'll be a witness there talking about what [00:25:30] our experience has been with it. And I'm hoping that it's a sign that Congress is starting to say, wait a minute, maybe the law is good, but we need more time. We need some changes. Uh, if you don't know what we're talking about. I think we did a podcast with some of the more oh, we want details. Um, we.

Annie Schwab: Did more like in the December January time frame of recordings. Um, so and we spent quite a bit of time [00:26:00] explaining, you know, who's a beneficial owner, what does the report look like, what kind of information they want, what to do if that information changes? How long do you have to make changes? When do you need to file the very first one? You know what? If you close your business or you start a business, what is what is your time frame? And there is quite a bit of information out on the FinCEN website. There's actually kind of a flow chart. You know, if this, then you do this and you or maybe you're exempt, vice versa. Um, [00:26:30] so if this is brand new to you, take a peek at it. Um, but it's unfortunately it's a, it's very burdensome to small business owners and there's such quick. Uh, turnaround time for updating these forms. It's not something you just do once a year. If something changes, you have to go and update it. And you only have 30 days. And penalties are this and that. And to be honest, it's it wasn't publicized. Small business owners were not educated [00:27:00] quite well on it. And it's put tax practitioners in a hard spot because we're not even sure assisting our clients with it is not stepping over the line and practicing law.

Roger Harris: Or a lot of insurance companies are telling us they won't cover us if we do that. We've had attorneys advise people like us to don't don't do it, don't do it. Uh, but it is the law. It's today. This year, it's in effect. Yep. Uh, you need to familiarize yourself with it. You know, [00:27:30] these things that we're talking about, nothing has really changed. So, uh, we're hoping some things change. Now, FinCEN does put out some FAQs. They put some out three days ago. Uh, again, they're not what we're accustomed to in our dealings with the IRS from a tax standpoint. They're they're not always real world answers and real world examples and and you you for every FAQ they put out there's three more questions you wish they had answered [00:28:00] that they don't. So but it's something that if you have small business clients, you need to make sure you're familiar with it and monitor what's going on, because the court case could throw a huge kink into it if they could, if Justice Department would lose the appeal. I don't know how we go forward with some businesses that have to and some that don't. I think justice is hoping they can get that ruling overturned, but there may be 50 other lawsuits coming in right behind it. Well.

Annie Schwab: I think I don't know if I mentioned it, but AICPA sent a [00:28:30] letter and I personally like this stance. I know padgett's in, but basically saying, you know, can we just halt the enforcement and all until all these legal matters are resolved, give it a year to get everything in order and organized and then implement it, because the idea, the purpose of it is, is important, right? I mean, it's it's it has good purpose. It's just. Maybe. Maybe they went too fast, I don't know. Um, but [00:29:00] hopefully the letter sent by the AICPA. Fingers crossed, might help get some of some things moving in Congress. I don't know, I guess we just have to wait. It's an election year.

Roger Harris: You have to wait. It's going to.

Annie Schwab: Happen.

Roger Harris: I mean, it's going to take Congress for any substantial changes because the law is what the law is. And they've made their rulings now they can tweak some things, but there are certain things that would take Congress to to act for them to make, make changes. So, um, yeah, it's a, it's a, it's an important thing because the penalties are like $500 a day and you can go [00:29:30] to jail. And, and I know one of the points I'm going to try to make next week is I'm afraid we're going to have more people getting fined, not for laundering money, but for not filing a form. And I don't think that's what this was intended to do was to catch an honest business person. And let me say this if you're not familiar with it, the penalty doesn't require that you be laundering money. You don't have to be committing the underlying crime to get the penalty. You can get the penalty for just not complying with the disclosures that [00:30:00] are necessary by the Corporate Transparency Act. So if you're not familiar with it, again, during tax season, we did get a court case. Some have heard that to think the whole thing was thrown out, that's not what happened. It's limited to a narrow group of owners, of owners, members of a certain small business association. And even that's being appealed. So we'll we will continue.

Annie Schwab: To to keep you abreast of that.

Roger Harris: We'll continue to monitor it and hopefully we'll get some action. All right. You're back. [00:30:30] We're back still out there. So what are we going to talk about for IRC? You're coming out of tax season. Uh.

Annie Schwab: You went into.

Roger Harris: Season. We're not gonna know the answer to this, but I wonder how many of you out there had to amend tax returns to claim an IRC credit for a claim that was paid? Interesting to know that we won't know that. But what else has happened? Where where do we stand with that? Because it's kind of, well, a moving target still. Yeah.

Annie Schwab: Well, [00:31:00] you went into tax season with a moratorium and it's still there. Still there. Um it is they have not there's no end in sight. So to say um, the IRS is slowly starting to process the IRC claims that were kind of sitting in the warehouse. Right. Um, extremely slow processing times. Um, more likely than not that you'll get requests for additional documentation, and we'll talk about that in a minute. Um, much slower [00:31:30] processing times. Again, if you have a client that, you know, got the IRC and, you know, didn't qualify, there is still an incentive. Even though the voluntary program has ended, there's still an incentive to pay it back. Pay it back in full, um, with a waiver of penalties and interest. There's I mean, the mills are still out there. It's not like you can't get this still. In fact, I think the number is 25,000 a week. New claims coming into the [00:32:00] IRS, is that right?

Roger Harris: Yeah, 20 to 25,000 coming in every week.

Annie Schwab: And um, and so it's, you know, mills are still out there. So there's still, you know, the potential that your client might be, you know, approached, um, to consider whether they qualify. So it's not a lot of progress. I, I, I'm kind of stuck on, you know, right now you better have good records. Yeah. I really, really hope that [00:32:30] if you qualified for the IRC or if you went to the mill, I hope that you got the calculations, the spreadsheets, the what? How did you qualify? Why did you qualify? How many employees qualified? What employees didn't qualify? Um, because, you know, under audit, they're going to ask for a lot of information.

Roger Harris: Yeah. And we were asked to to look over that form. I don't know if it's public. So I'm not going to. Oh, okay. Basically the, uh, information request form for [00:33:00] an IRC claim. I don't know if they're sending it to everybody or select ones, but I can tell you the amount of information that if you're if you get one of these document request forms. Um. You better have kept good records. I can tell you this. If they went to a mill, they're not going to have anything close to what they need.

Annie Schwab: Well, it's four pages of things that say we. You need to either answer the question, attach copies, and it includes everything from a list of employees. Who do you [00:33:30] pay? What do you pay? When did you pay? Were they also listed on the PGP copies of tax returns, amended tax returns, employment tax returns? W-2s I mean, they're asking for a lot of information, copies.

Roger Harris: Of government orders, you know.

Annie Schwab: Government orders. Yep. Copies that your business truly did qualify. And they're saying like having board meetings and meeting notes and emails to employees, letters to customers or your clients, your vendors notifying them of, you know that they can't perform their [00:34:00] their business procedures due to Covid. So it's pretty intense. Pretty intense.

Roger Harris: Yeah. And we don't know how often it'll be used. I mean, you mentioned they're slowly processing claims. I think one of the reasons they're slowly processing claims, there's a waiting to get this process in place so that particularly for larger claims, they're not just going to, you know, in the beginning. And this is again, we got to remember, this started in the middle of a pandemic. In the beginning, the whole idea was get the form in, get it processed, get the money out. Yep. [00:34:30] Save the.

Annie Schwab: Business, get the money in their hands so.

Roger Harris: That they can get the money out, get them through the pandemic. Yep. Then what we all saw was the fraudsters jumped in and the amount of money going out was way in excess of what people were eligible. So we've seen a reverse now that instead of rushing to get it out, we're slowing down, getting it out, and we're going to ask for more information again. Again, I think this is public, but I don't want to. We're not going to make it available until we're sure that it is. But the amount of information now, if you did it properly, [00:35:00] you did the IRCc claim, you did the 941 X's, and you followed the laws and followed the rules. You probably should have everything they ask for. Maybe you need to go get a copy of a government order. You just knew it was there. You didn't bother to get a copy of it, something like that. But other than the.

Annie Schwab: Calculations and the supporting documentation and the employee list and all that kind of stuff, PGP loan information that you should have.

Roger Harris: Yeah, again, the government already may have to chase [00:35:30] down. Again, I'm not saying you have to do this for free, because this is going to be kind of like, you know, if you got a client, get an audit for their tax return, you wouldn't represent them for free. So this is sort of the same thing, but it's a pre refund. You know they're trying to catch the money before it goes out out sending it out and try to go and get it back. So um. They're they're serious about catching the fraudsters. They've they've caught some. They're trying to catch more. Yeah.

Annie Schwab: What have you heard. What have you heard? I feel like you have some good stats.

Roger Harris: Uh, well, [00:36:00] they've they've sent some. They've sent some people to some mill people to jail for a couple of years. Uh, criminal investigations got, I think, 400 cases. You know, the problem with. And I don't mean to sound negative, but to take somebody to court for something doesn't go quickly. You know, they've got rights and they get lawyers. So, I mean, you know, you'd like to think they could just go around and say, well, they're crooks, they're crooks, they're crooks. Stop them, put them out of business. Things like that takes a while. Yeah. So that's why they're trying to slow it down. But the amount of fraud is, is astronomical. [00:36:30] And I the IRS has said that they think of the you mentioned the claims still coming in, that they think 95% of them are fraudulent. Yeah. That's crazy. That's probably a little high, but I don't know how high it is. Uh, and and this commissioner particularly is serious about trying to stop the amount of fraud because we're going to look back on this sometime in the not too distant future and realize exactly, uh, how disastrous, [00:37:00] yeah, how much fraudulent money went out that will never, ever get back and kind of insult to injury. We had the withdrawal program. We had the voluntary disclosure where you paid 80% back and the 80% was to compensate for the fees the mill charged. And I heard situations where the business went back to the mill and said, I want to withdraw the claim or I want to take advantage of the 80% payback. And they were asked to pay almost the same fee [00:37:30] to, I know to do that as to get them the money they weren't entitled to before.

Roger Harris: So it's not going away, I'm sure. Not just because Annie's back. We'll talk about it again in the future. Uh, a couple of other just DC things. Then we'll move on to, um, there was a bill passed the House that had some changes. Uh, research and development expensing came back and child tax credit increased. It passed the House with bipartisan while you were tied down during [00:38:00] April 15th. Nothing's happened in the Senate. Most likely. Nothing's going to happen with it in the Senate. Um, we're beginning to see the posturing of the two parties because post-election we've got the, uh, expiration of either the Tax Cuts and Jobs Act or the Trump tax credits, depending on how you want to name it. Uh, the parties are beginning to go to their corners and talk about those things and, uh, in political terms. So this election is [00:38:30] going to have a lot of impact on future tax policy. Um, which makes it hard to think that this bill, though there are still people pushing to get this bill through Washington to, uh, there's a lot of there's a lot of criticism of the, uh, lack of expensing for research and development. And as a trade off, they want to increase the child tax credit, but looks like it's not going to make it until post election. Uh, but I think you can probably see those will be a couple of things that, you know will probably be part [00:39:00] of the discussion since it was passed.

Annie Schwab: Makes planning hard.

Roger Harris: Yeah, yeah, it makes planning very hard because we've got a major piece of legislation that if they don't do anything, just goes away and we go back to uh, you know, pre Trump tax gains. What was interesting, this same committee that's holding the hearing on boy held one on uh. Supposed to be complexity on small business. During the filing season, it turned into a discussion on future tax policy. But, um, [00:39:30] what's interesting is, again, you can see the Republicans honing in on one thing and the Democrats honing in on something else. And I had no idea how it's going to end. Going to depend on who's president and does that party that wins the presidency control the Senate and the House, where they have the ability to almost run anything through so important election? Not a lot of great choices, but an important election. Um, we'll [00:40:00] have to figure out figure out where it where it goes, uh, from there. But it's going to make planning hard. Uh, let's see, how are we doing time wise?

Annie Schwab: We just have a few more minutes. Um, just some reminders, sort of, you know, all those taxpayers that are working and living outside the US. That deadline is June 17th, which is a Monday. Um, we have got a lot of disaster relief ex, um, states. Uh, so you might have some lingering [00:40:30] tax returns that are not even due yet. Most of those become due in the summer months. I would say in general, um, we've also got some tax payers who live or have a business, you know, in, in Gaza or Israel or the West Bank. They also have an extension until October. I think it's like the 7th of October. Um, so just, you know, weird deadlines, weird dates coming through. I will say the IRS does publish yearly the The Dirty Dozen, which is sort of like the variety [00:41:00] of, like the most common schemes, tax schemes. And no shocker here. Irc is at the top of the list. Yeah. So but but there's you know, most of them just seem to shift, you know, did it go from number two to number four. Most of them you know, continue to kind of recycle unfortunately. Um, and then you want to talk about this the calf scam that's that is one thing that I do want to draw attention to. Yeah.

Roger Harris: For those of you that rely on transcripts of your clients a good bit, um, the [00:41:30] IRS and this just came out, uh, April the 8th, I think. Yeah, they're they're they're putting more restrictions on your ability to just go as a practitioner and grab a, uh, transcript. Your calf. Well, there's two things we're talking about, I think. I'm not sure I'm talking about the right thing. There's there's some calf numbers that have been compromised, and you probably have already gotten your letter on that case where you're going to have to reauthorize yourself to some extent. It'll be a little faster process than initially and get a new [00:42:00] calf number to even be recognized. But also, even if that's not a problem, there is going to be a different way of accessing transcripts. You're going to have to call the practitioner priority line and have them execute the the putting it into your online account. It won't be done automatically. So there's evidently been I don't know what caused it, but uh, big activity and calves being compromised. We've actually [00:42:30] heard Ethan's being compromised. I mean, the scanners are getting more active and better at what they do. So you may find yourself, uh, your calf not working at all.

Annie Schwab: It'll take longer to get those transcripts, because you have to go through the texts.

Roger Harris: You got to go through.

Annie Schwab: The priority.

Roger Harris: Line, party line to get them. Uh, again, hopefully your clients have online accounts, and maybe they can go pull it out of their account and hand it to you. Yeah, um, but they gotta have an online account. But [00:43:00] the scammers continue to create problems for us and how we want to run our business and do our business. They're still coming after us. So if you don't have a good security plan for your office, that's another thing to add to your post. April 15th. That's true list. If you think you were compromised, reach out to your local stakeholder liaison at the IRS. Talk to them. Obviously, call your insurance company. But you know, take. And we did a podcast while Annie was out with Catherine, one of our pageant [00:43:30] offices, who was unfortunately a few years ago, uh, a victim of of. Having a firm hacked. Fortunately, because she had good security, because she had good insurance, because she did all the right things. Uh, she was able to minimize the damage to basically being a lot of her time being spent on something other than running her business or running a marathon or whatever else she'd prefer to do. Um. Don't let that happen to you [00:44:00] particularly. Don't just take this concept that you have to check a box, that you have a security plan as something that just means check the box, take it seriously. It's going on. It's going on in big numbers, and it won't be fun if it happens to you. And it's causing the IRS to have to do some things that we wish they didn't do. You know, we'd like them to do it the way we always did it, or we wanted to do it. But that's that's not the world we live in today. So, uh, be [00:44:30] careful with your data. Warn your employees about those emails that come in. We all get them that says, hey, I need somebody to do my taxes and.

Annie Schwab: Click here and then.

Roger Harris: Be careful. I don't know how many clients just sent you an email and said, hey, my name is Olivia. I need my taxes done. Click here. You know? Yeah, uh.

Annie Schwab: It happens.

Roger Harris: Probably not legit, but so a lot of stuff, you know, April 15th doesn't mean the end of anything but the first [00:45:00] wave of tax filings.

Annie Schwab: And we need to we need to do.

Roger Harris: Yeah, we got a lot we can do and a lot of things that will make next year better if we do them. So that's right. What else? Any. What any. Hey you were you're back.

Annie Schwab: I'm back. This is.

Annie Schwab: Fun. I'm glad to be back. Good things to talk about. Um, lots going on, so I'm sure we'll be bringing you some additional news, but I am glad the first wave of tax season is over. I don't know about you, but yep.

Roger Harris: Always, always glad to get April [00:45:30] 15th behind you. It doesn't. No matter what percentage of your returns you do by April 15th, there is a certain April 16th. Always just is a better day than April 5th. For some reason I told somebody the other day the sun is brighter, the food tastes better. I mean, everything is is better once April 15th is over, even though we all know we've got work ahead of us, and there's still plenty of things to do and plenty of opportunities to to make our businesses [00:46:00] and life better. So any final parting comments, Annie?

Annie Schwab: Nope. I'm. Thank you for listening. Thank you for following us through tax season. Um, continue to watch, invite your friends and we'll certainly be back.

Roger Harris: Yeah. Let everybody know you know, that we like you know, tell them to take a flier and listen to a federal tax update podcast. We'll we'll try to keep it current to what's going on. Um, we'll be back in a couple of weeks with another one and have no idea what we'll be [00:46:30] talking about. But somehow I imagine either BOE or IRC or both will come up sometime, probably around that time. All right, Annie, great to see you again. Glad you made it through tax season. Thank you for listening, everybody. Glad you made it through tax season. Tell your friends and we'll be back soon with another federal update podcast. Bye everybody. Bye.