There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.
Roger Harris: Hello everyone, and welcome to another Federal Updates podcast. We're Annie and I are here right in the middle of a crazy March tax season. Annie, how's things in Dallas?
Annie Schwab: Well, it's busy in Dallas. I'm sure it's busy everywhere. Um, but it's it's going. That's what tax season's all about. So we'll see [00:00:30] how many more new things can pop up between now and April 15th. Yeah.
Roger Harris: And I think the last podcast we did, Annie, had to issue a slight correction because things changed right afterwards so fast. It's not a correction, an update. So given the world we live in today where things seem to change hourly, uh, this podcast is being recorded on March the 7th, and depending on when you listen to it, it could either be one of the best podcasts you've ever listened [00:01:00] to. Are completely irrelevant the way things are going, but we're going to talk about what has happened since our last. And, uh, in some cases, we hope that at least we're going to start with, boy, this will be the last time we'll talk about boy for a while.
Annie Schwab: I certainly hope so. It's about time we can bring some good news to everyone about boy. Right?
Roger Harris: Right. So? So with that, you know, some of you may have seen some of this, and this won't be new to you. We're going to try to give you a little different twist on everything. But Annie, let's start [00:01:30] by saying what happened with boy since. Well, I think when we did the last podcast, we said you had to file. Then we had you had to record an update that said you didn't have to file anymore.
Annie Schwab: And there was this March 21st deadline hanging out there that may or may not have existed. But you're right, as of today, um, earlier, like about a week ago, the Treasury Department came out and announced that they will not enforce any of the penalties or fines associated with the [00:02:00] Corporate Transparency Act. So that's the beneficial owner reporting requirement. Now that doesn't necessarily mean it's not enforceable, right. But more along the lines of where they're going. The Treasury's planning on issuing proposed rulemaking that will sort of narrow the scope, focusing mainly on the foreign reporting companies rather than the US reporting companies. And in all honesty, the [00:02:30] the timeline was was horrible to begin with. The there's been a lot of back and forth court cases, um news media reporting incorrectly information about what this was. But if there's one takeaway from today, as of right now, you do not have to file and you will not be assessed penalties or you know, any you're not going to jail. You're not going to get. You're not going to get thousands of dollars of penalties with respect to [00:03:00] the Corporate Transparency Act.
Roger Harris: And again, we haven't seen the final rulemaking that they're going to issue. But we're pretty certain because they've said this that it's going to narrow it down to unless there's some foreign component of it, the penalties will not apply. Now again, the law is still there. There's still the Corporate Transparency Act has not been repealed. So it's still on the books. Uh, and until and unless Congress acts [00:03:30] to repeal it, uh, I guess a court could say you have to enforce it. You know, right now, what's interesting is now, you know, for up until, I guess a few days ago, when this ruling came out, all the action in the courts were people who opposed it, you know, trying to get it. It was unconstitutional or give us more time or whatever. Well, now that fence, whatever. But now that FinCEN has come out and said, we're not going to enforce it. You're hearing for the first time from the people who are proponents of the Corporate [00:04:00] Transparency Act, saying this is going to harm the United States. We're in sanctioning money laundering. We're doing all. So I guess they could go to court and try to.
Annie Schwab: Go the other.
Roger Harris: Way. Yeah.
Annie Schwab: But yeah.
Roger Harris: I don't see FinCEN pushing it. You know, it would have to be the court, but I guess you can't say it's completely over unless and until Congress, um, repeals.
Annie Schwab: Repeals it altogether.
Roger Harris: And there are some bills out there to do that. Now. They haven't gotten a lot of traction. And this may make [00:04:30] it harder to get a bill done, because they don't probably see the distinction between not enforcing it and the bill still being in existence. And again, in four years from now, if we get a new administration and the bill is still on the books, it could come back. So it's not to say that all the reporting that has been done may not at some point be beneficial because you're ahead of the curve, you know, because that's I think that's. And I'll, I'll let you talk about this. We've been getting a lot of questions about, well, what about the people who've already done it, [00:05:00] you know.
Annie Schwab: Right.
Roger Harris: Are they hurt? Are they harmed? Should they withdraw? What should we give them their money back? So talk a little bit about what we're telling our people, uh, for, because it stopped and started. And every time it came back, we did some. And then it shut down some more. So what should we do? Or how should we communicate with clients that have already complied? Now that it appears to me.
Annie Schwab: And I and I will start by saying, if you go to the FinCEN website, you can certainly [00:05:30] file like it is a voluntary filing. They're being accepted. There's it's not like it's been pulled from the website. I mean, it is it is still active. It is still there. Um, so what we've been telling our clients is, you know, if if you've already filed, great. Sit tight. If it gets repealed, we'll figure out what's going to happen with the information there. I don't think if you've already filed and there's one of those instances that would make you have to go update within 30 days. None of that is is in play. But if [00:06:00] you've already filed, you've you've already filed. If and if and if you're a tax preparer and you filed and you got paid and I doubt any of your clients would be like, well, I paid you for something that we didn't have to do. Well, at the time that you did it, you did have to do it, right. So, you know, don't get caught up in that that, you know, wheel of. Well, should I give them back their money or what should I do? I will say if you're like midway, you know, you've maybe collected some data or you've started the process and you're waiting on something, I would say, just wait. Give back [00:06:30] their information unless they want you to continue on. Obviously, if the client wants you to continue on and file, you can certainly do that if that's what you want to do.
Annie Schwab: Um, but I wouldn't necessarily go out and start promoting this as a service that you provide or continuing to collect information at this time. Now, if you have an engagement letter to perform the service, maybe consider disengaging. You know, I don't know what everybody's practices are. If you've got something formal [00:07:00] saying that you would complete this by a certain date, I would at least maybe disengage from that or make that null and void. Just, you know, for liability reasons. But but yeah, I mean, it's it's hard to say. It could come back like you said. It could come back tomorrow. I don't think it will. I don't see that necessarily. But don't it doesn't have to be. Oh, I did all this work for nothing because until it gets repealed, it's not for nothing. Um, so that's that's basically what we're telling our offices. I'm a huge proponent of [00:07:30] sharing the communication to your clients, making them aware of of what's going on. Even if you don't go into great details of what was here. And then it changed there. And then this court did that. And then now we've got this, you know, just a simple statement along the lines of, you know, as of today, this is put on hold and you won't. There's no enforcement of it. So at this point, you know, just sit tight. Which I guess is what we've been saying forever.
Roger Harris: Forget, boy, [00:08:00] and get through the tax filing season, because there's just really no energy behind bringing it back right now from either the proponents of it, or I'm not aware of anybody that's taking it to court. And, um, clearly what we've seen now is FinCEN saying they're not pushing it, which was they were always pushing. Yeah, that's that's the biggest thing. So I think we're we're certainly safe for the, you know, as far out as we can see. I just don't want to say never. But [00:08:30] um, and like you said, Annie, I think it almost I would if a client came to me and wanted their money back, I'd almost feel like that's a client I don't want anymore, because they don't appreciate the fact that, as you said, we did what the law required when the law required it. Yeah. Uh, and it's not our fault. It's not the client's fault either. But we've put the time in. We did the education. We did everything we were supposed to do. We can't control. God knows we can't control what goes on in Washington [00:09:00] anymore.
Annie Schwab: So if we ever did, if we can't.
Roger Harris: If we ever did. It's certainly impossible now. So, uh, I wouldn't feel the need. I mean, you can make your own decision on a case by case basis, but I would I would really say if a client asked for that. Unless they were kidding. Um, I would, uh, I would really look at my relationship with that client if they if that's how they.
Annie Schwab: If that's how they want.
Roger Harris: To do business. We have such a transactional relationship that now that something got repealed, I mean, what if they repeal the income tax system, which [00:09:30] some people say we can do? I'm not sure we can, but, you know, would would they want all their money back for all the years they filed a tax return? They didn't have to. I don't know.
Annie Schwab: Yeah. Yeah.
Roger Harris: I'm not for giving them any money back. Yeah.
Annie Schwab: I'm there with you. I'm not doing it either.
Roger Harris: All right. Any last? Let's hope that this is the last time you will hear boy from Annie and I for ever. Maybe.
Annie Schwab: Yeah, but that would be nice.
Roger Harris: Yeah, because I don't know what the next thing would be. But, you know, we'll see.
Annie Schwab: So you never know something, but I do. I, as you're [00:10:00] probably listening to this, we've got this looming March 14th government shutdown date only days away. I don't know, I, I personally have not seen a lot of progress, so to say, but I do agree with both Republicans and Democrats that are saying we are running out of time. Yeah.
Roger Harris: And that's what next Friday, as we sit here.
Annie Schwab: Today I think.
Roger Harris: It's today.
Annie Schwab: Yeah. Mhm. Yeah. So only days away to you know avert [00:10:30] the government shutdown. And and from what I've seen negotiations have not gone smoothly. Um and I'm there's speculation that maybe some of the Democrats will withhold their votes sort of Protesting all the stuff that's going on with the spending cuts and and at the IRS. So I don't something big is going to have to change real quick. Yeah. I think we'll see something.
Roger Harris: Couple of points. Number one, this is a different bucket [00:11:00] of money and problem than the big reconciliation, which we'll talk about in a minute. When it comes to tax reform, this is just keeping the government funded. Uh, which is uh, scheduled to run out on the 14th of March, um, which just basically shuts the government down. So nothing gets done at that point. I did read an article today. Um, here's the dynamics of funding the government. It's conceivable that the Republicans could all band together [00:11:30] and pass an extension of the debt ceiling and fund the government. Okay. In the House, because they just need a simple majority.
Annie Schwab: Majority? Right.
Roger Harris: Even if it passed the House, when it goes to the Senate, it's still going to take 60 votes. So it would have to be something that the Democrats at least provided seven votes to do, because there's only 53 Republican senators. So it's a big hurdle. And unfortunately, it's going to be decided by [00:12:00] how the two parties view who gets the political blame if the government shuts down. So, you know, if the Democrats think it helps them, then they won't provide the seven votes until they get a little sweat out of the Republicans. If the Democrats think it hurts them, then they'll they'll join there. The one thing that we've been told, and I think we can count on, for those of you that are listening to this, probably have something to do with the income tax system. Government shutdowns don't close everything.
Annie Schwab: Yeah. You still [00:12:30] have to file your tax returns.
Roger Harris: You got to file your taxes.
Annie Schwab: Good point.
Roger Harris: And the IRS is usually considered critical functions don't shut down. And during the filing season the IRS is considered. You know, it's funny. They're critical until they're not. Right. But they're considered critical. So they will at a minimum. In the past, at a minimum, have kept everything related to the filing season going. Now, some things may shut down at the IRS. Some may [00:13:00] they may keep the whole agency open. We don't know. But it's not going to directly impact the filing season. If we have the government shutdown, you'll still be able to e-file. Returns will still get processed returns, refunds will still be sent out. Um, maybe some delay, but they don't shut down. They have to go to work and process tax returns during the filing season. So, uh, it's something to watch. We've got a week. Uh, it's really about politics. Eventually, [00:13:30] they're going to have to fund the government to keep it open. Um, but we got to play the game.
Annie Schwab: All right, what's up next?
Roger Harris: All right. As I mentioned, this is different than what this whole reconciliation and the tax reform piece, this is funding the government as this is kind of like paying the bills. The reconciliation is next year's budget.
Annie Schwab: Right. Good point. I like I like how you say it like that. That makes sense.
Roger Harris: So [00:14:00] and it's in the reconciliation where tax reform that we're all hearing about. What I thought I would do to start with Annie. And if you don't mind, it may take me a minute, but I want to walk through all the steps of reconciliation. So as you hear things, you don't get confused about what really happens, because there's really kind of A66 step process that you walk through in reconciliation to accomplish tax reform the way they're doing it, starting off with understanding [00:14:30] what reconciliation is there just to be able to get around the Senate 60 vote filibuster. That's all this is about because.
Annie Schwab: It's not new.
Roger Harris: It's no, this is not new. It's been used before. Both parties have used it, so it's not new. So what we're trying to do here is if I'm the party in power and I don't have 60 votes in the Senate, I want to get my agenda through. And I don't want the filibuster to stop it. So it starts like this. Both the House and the Senate come up with [00:15:00] what they call their their reconciliation package, which is kind of this broad outline of how much money we plan to spend, what we plan to cut. It kind of puts a guardrail around dollars. It sets some dollar limits. Um, the Democrats, I mean, excuse me, the House does it and the Senate does it. And in fact, both have done the first step. They have both put out their broad plan for spending. Unfortunately, [00:15:30] we've talked about the one bill versus two bills. The House package is one big bill. It's everything.
Annie Schwab: One beautiful big.
Roger Harris: Bill. One big, beautiful bill.
Annie Schwab: Yeah.
Roger Harris: There you go. The Senate is the first of two bills. So step one is completed, but there's a.
Annie Schwab: Gap.
Roger Harris: Conflict between the two. So step two is they have to agree on what direction they're going. Are we going to go 2 or 1. So that's the second step. We haven't [00:16:00] even. So all we've accomplished today is the first step. That's where we are. So when you hear a lot of talk about tax reform and topics we ain't got to that yet. We're still right now we have a reconciliation bill in the House and a recreation a reconciliation bill in the Senate. The next step is they have to agree. Are we going with 1 or 2?
Annie Schwab: Do they have a deadline? How long can they stay like this?
Roger Harris: Well, they can't do any. They have set some artificial deadlines. They want to get the tax stuff done by Memorial Day. Well, I saw that. [00:16:30] You know, as we go through these steps, they better be moving quickly if they're going to do that because we haven't even again, we've just accomplished one of six steps, which is we both passed a reconciliation, but they're different. So now the two houses have to come together to decide, are we doing one or are we doing two? That's step two. We haven't we haven't accomplished that yet.
Annie Schwab: Right, right.
Roger Harris: Once that's done, then the house [00:17:00] goes over and does their thing and the Senate goes over on their thing about what? How now to actually spend that money and what to do. So there can be a tax reform package in the House and a tax reform package in the Senate. There can be spending cuts in the House and spending cuts in the Senate. So they both go back to their committees. Now that we've agreed on how we're doing it, and then they all fill in the blanks. You know what? What does the tax reform look like? What are spending cuts? How many [00:17:30] agencies are we going to close? Well guess what. Those will be different too of course. So then we get to step four. They both come up with their package and they both pass it. Okay. Well, guess what you got to do then. Now you got to get together. At least at that point we'll have the parameters of what? Tax reform.
Annie Schwab: There'll be a better understanding of what what way we're going. Yeah, yeah I agree.
Roger Harris: If something's in the House and in the Senate, then it's pretty much going to be in the final [00:18:00] bill. If we've got something different, you know, like let's say the House decides we can only afford to do no tax on tips and the Senate wants to do no tax on tips, no tax on overtime, no tax on Social Security. Well, it pretty means tips will make it. And we don't know about the other.
Annie Schwab: The other two. Right.
Roger Harris: So so you'll you'll have a pretty good indication of where tax reform is going. But then the fifth step is they have to then merge those two plans together into a single plan. That [00:18:30] then goes back to both the House and the Senate. And they have to pass that plan.
Annie Schwab: So it has to go back to the voting at the very last step from the last stage of all the modifications and the negotiations. Well, that that seems like a lot of work before Memorial Day. Now, I'm not so positive.
Roger Harris: And there is a step after that that I don't think is relevant here. If we had split government, like if we had a Democrat in the white House and a Republican House and Senate, the president ultimately has to sign off on it. So [00:19:00] in this case, I don't think they're afraid that Trump would veto this bill. But conceivably he could veto the bill. And then it goes back to both houses and has to the veto has to be overridden. So that last piece, I think is pretty much an assumption that that's not going to be an issue. So I hope what you hear in this is we've got a lot of work to still do. Yet the first step was accomplished. So we're we're moving down the path. But there's a lot of backdoor discussions [00:19:30] and a lot of things that have to be talked about and agreed on before we're even close to having a tax reform bill. Each step will give us a little more indication of what that bill might be.
Annie Schwab: But all right.
Roger Harris: You really got to get to those final two steps before you're going to know for sure. The Republicans in the House have set them up, as I mentioned, a memorial day weekend deadline. That's that's pretty aggressive with all of this, because it's not like these sides get along that [00:20:00] well.
Annie Schwab: Well, and then it's what you see in the media and what's really happening behind closed doors. I mean, it's hard to know where is progress even being made. Um, and I feel like maybe we take two steps forward and then a step back. And so, I don't know, I'm with you. I think that's going to be a huge hurdle.
Roger Harris: Yeah, it's it's actually harder when you have to fill in the details. Like so far they just kind of agreed on this big overall overarching amount of money. But even [00:20:30] in the Republican Party, you've got people who want to cut more spending than others. Uh, you've got people who want to be more aggressive on tax benefits and things like that. Well, if 1 or 2 Republicans in the House buck whatever the majority wants, it never makes it out of the House, because I don't see many Democrats supporting whatever happens here. So, I mean, that's why the two bills. First of all, I read an article [00:21:00] today, the House, the Senate wants to do the easy stuff first. They want the energy and immigration in their one bill. Right. And then do a.
Annie Schwab: Save the tax reform for.
Roger Harris: Yeah. For the second bill. Well the the House thinks they can only get one bite at the apple. You know, we're going to have to ram this through as it is. We can't try to do it twice. I read an article today. And again you got to be careful what you read and believe that the two bill approach has never worked. There's never been a two bill, uh, thing like this happen. I [00:21:30] don't I didn't go back and look at it. I didn't research it, but that's what I was told. And that's the house saying this has never worked and it's not going to work here.
Annie Schwab: So we're not even going to attempt.
Roger Harris: So we got to convince the Senate to go with one big bill. And the one big bill makes it harder to get Democrats when you got to get 60 votes, because, you know, there's going to be something in the big bill that they don't like. And so, uh, we don't know where the horse trading is going to end and when we're going to get something. Uh, but each of these steps will tell us a little bit [00:22:00] more about what tax reform is going to look like. And because clients are going to want to know, you're going to want to know, you know, does 199 a stay does.
Annie Schwab: The Tax Cuts and Jobs Act. I mean I mean, you know although Trump is saying that he he is he's hinting maybe I should say about putting a priority on a lot of the revisions, fully restoring many of the provisions in the Tax Cuts and Jobs Act, the Salt deduction, the bonus depreciation. 199 A. I mean, those are all very [00:22:30] topics that are reappearing very frequently in discussions.
Roger Harris: So and some have bipartisan support, but again, they're all in one package. It's not like you can say, well, I'll vote for that, but I won't vote for that. I mean, it's going to be an all or nothing approach. So would I like to believe we could get this done by Memorial Day? Because what we all want is we want some certainty. So as we're advising clients about.
Annie Schwab: Making.
Roger Harris: Decisions, you know, the sooner we know what it is, the more we [00:23:00] can help them in making plans for the future and things like that. So we all would like to know what we like as much certainty as we can have. And and we're not. I'm afraid we may not get it because again, and we're going to talk a little bit more about, you know, the whole Washington, uh, stuff that's going on. It's just like, we're not in the same planet here. So how do we negotiate some really tough things. Unless I don't know. I don't know what changes [00:23:30] it. Um, like I said, I mean, if you watch the state of the Union, I mean, we had very few things that everybody in the audience stood up and clapped for.
Annie Schwab: Yes, yes. I mean, and did you know that it was one of the longest speeches? Yeah, it was 99 minutes. I guess I, I guess I thought, I guess I didn't realize so many were short and sweet. Um, yeah.
Roger Harris: I think.
Annie Schwab: He was not.
Roger Harris: He and Clinton are battling, for the record, I think. Okay, okay. The two [00:24:00] of them. Yeah, that doesn't make sense. Those are the two. But so, I mean, you just didn't see a lot of what I would call common ground in that state of the Union. And yet those are the people that are going to have to come together to get us a, a tax bill. And if we do nothing, the Tax Cut and Jobs Act. We've said this, you've heard Jenny and I say this, it just expires. Yeah. And we go back to what the law was before that, though, some of the corporate and business stuff was.
Annie Schwab: Some of that was permanent on the first round. Yeah. So [00:24:30] but I mean the the conversations about the tariffs is, is also I mean it's it's huge. And it was a large part of, of his speech. So I don't know what your take on on sort of the idea of I don't know.
Roger Harris: I'm not smart enough to understand tariffs. I mean, I mean conceptually, yes, I know what they are. There seems to be a battle as to whether they're inflationary or not and whether who eats the cost of the tariff. Does the consumer [00:25:00] eat it? Does the company paying it eat it? Does the government eat it? You know somebody's paying it or something. Yeah, but but what I have found really interesting and, and I think our listeners realize how crazy this sounds. Um, there is talk that and I think the Secretary of Commerce has said this, and President Trump may have said it, that ultimately they believe that we can have a system where we abolish the IRS and we create, not the Internal [00:25:30] Revenue Service, but the External Revenue Service. And the External Revenue Service collects all the tariff money, and they can collect enough in tariffs to eliminate the IRS because they can eliminate the income tax. And we can fund our government 100% through tariffs. Um.
Annie Schwab: It's a big leap. Yeah.
Roger Harris: I mean.
Annie Schwab: It's in my opinion.
Roger Harris: Yeah. I've never [00:26:00] been in a world where that was doable. I'm not going to say it's impossible, but you are hearing that as some of the goals of the administration is to eventually get to the point that we can abolish the IRS, abolish the income tax system, fund our government with tariffs, and we create a I guess you're auditing countries instead of people at that point if they don't pay their tariffs, right?
Annie Schwab: I mean, the focus is on China and Russia right now from what I could tell.
Roger Harris: I'm not confident that's [00:26:30] going to be something that we're going to have to deal with. But that is being discussed. And it is it is in the discussion that you hear. So don't be shocked when you hear it. But I think we're more likely going to continue to have an Internal Revenue Service, and we're going to continue to have a tax system that we're going to have to help people comply with. I just I just can't imagine a day in my life. Yes, but I will never have to pay. And then you still got what do you do about the States? I mean, so I mean, [00:27:00] the states can't charge tariffs. So you're still going to have a state income tax. I mean I don't know. I mean I'm going to try to stay out of this. I'm not trying to be political, but I think that's while you may hear it discussed, I think it's going to be very, very hard to pull off. And that's my opinion. So that's all I'm saying.
Annie Schwab: Well, and, you know, here we are saying that's going to be really hard to do. But guess what? They're about to fire 50% of the IRS workforce. Yeah.
Roger Harris: So you know, so we read.
Annie Schwab: So we read, [00:27:30] you know, so there's there's currently 90,000 ish employees. And to cut 50%, you're talking about 45,000 people. And I think they've already sent 7000. Um.
Roger Harris: 7000 got fired about two weeks ago because I was in Washington at the IRS the day that happened.
Annie Schwab: That's right. That was a bad day for you. I forget about that.
Roger Harris: Yeah. Um, well, not a bad day for me. It was a bad day for everybody at the IRS.
Annie Schwab: Yeah, well, bad day for you.
Roger Harris: Bad day to be at the IRS, I guess. Yeah.
Annie Schwab: And then, [00:28:00] like, 112 or 110 plus IRS assistant centers are going to close. So, you know, those are where maybe your elderly people go to to get help. But I mean, not just I mean, that's like direct, you know, numbers. But I cannot imagine how the the wait times at the service centers or on the calls are going to be or processing delays. I mean, we're we're into tax season now and we know that there are fewer returns being filed even [00:28:30] though the refunds are a little bit bigger. But that could also be we have so many, um, delays related to natural disasters. So I mean, like, you can't say that's because of it's not a direct correlation. There's a lot of factors that come into play of why people might not have filed their return as soon as they had in previous years, but, you know, all the correspondence, letters and the processing of amended returns. I mean, there's a lot of things that are very, very manually handled. And when you cut the workforce in [00:29:00] half, I don't know how how do you decide what takes priority? Who works on what. Like, I, I don't know, I'm I'm concerned I'm concerned.
Roger Harris: We all are. I think, you know, again, uh, some of this, you know, there's been because in the media in the last and this literally is every day something changes.
Annie Schwab: Yes, yes.
Roger Harris: What Andy is talking about is things that have been in the media that there was, uh, unnamed sources, shall we say, that said that the workforce is going to be cut by 50%. [00:29:30] You mentioned the closing of those centers.
Annie Schwab: Centers? Yeah.
Roger Harris: What has been interesting in the last 24 hours is, number one, if you listened to President Trump yesterday, he indicated that these employee cuts would now be done by the departments as opposed to Doge. I guess so. Walking back a little bit of the aggressiveness, and there was a hearing [00:30:00] yesterday where they were trying to confirm, like an assistant secretary of Treasury for something. And when he was asked about this 50% cut, he said, well, I haven't heard anything about that. I don't know if that's true. So you're beginning to see a little bit of it walked back because I think people realize that unless we go to this external revenue, all tariffs, you know, the government gets funded by what the IRS collects, right. And [00:30:30] and I think what you're beginning to hear now is, well, maybe we could get to 50%, but it's going to take a while and it's going to mean we're going to have to put more technology. You know, I don't think anybody really believes that we can walk in and slash the IRS by 50% April 16th and have a functioning IRS. At least that's what we're beginning to hear.
Annie Schwab: Well, and then we're talking about tax reform packages. And I mean, unless we're going to a very simple, [00:31:00] simple system, which I don't foresee, no tax reform. I mean, that requires people to develop new forms to educate the public and, and process returns and understand what's happening so that the correspondence goes well. I mean, that takes people. I mean, they I will say the IRS has made great, fantastic strides on technology, and we'll talk about that in a second. And there are a lot of things that can be done, processes that can be done online [00:31:30] now versus, you know, going into a call center or getting on the phone to speak with an IRS agent. But if you're going to develop this new tax reform package, I mean, that takes manpower to get it out there. And if you're cutting staff, it just doesn't make sense to me.
Roger Harris: Well, nothing that we're doing is going to cut down the number of tax returns that have to be processed every year. In fact, they go up every year. So none of this reform is going to eliminate filings. [00:32:00] So you've still got to process the same number of returns. You're still going to have people who don't pay. You're still going to have people who need help. You're still going to have all these things. Now having said all that, I'm not and I don't think anybody believes that there aren't room for savings at the IRS. I think.
Annie Schwab: Sure, we.
Roger Harris: All know that every probably every government agency, whether it's state, local or federal, could be run better and be run with less cost. And I know we [00:32:30] support that. Everybody supports that. But let's just do it in a in a logical, well thought out manner so that the workload of things. Because again, to your point, I mean, you're going to wait longer for refunds. God forbid you need to talk to a person about a problem or you send in correspondence. I mean, again, the amount of work is not being cut back. We're only cutting back on the amount of people there to do the work. So it's going to have to stretch out. So I'm hoping [00:33:00] I feel a little better today than I did two days ago that we're beginning to hear like, well, wait a minute, maybe we can't do this as fast and as dramatic and drastic as we thought, because again, we're about to conceivably pass a major piece of tax reform that may take new forms, may take new instructions, may take new guidance. Uh, and I'm also and I'm going to speak from a personal [00:33:30] standpoint for, for Annie and I and our firm and our industry. What I'm really concerned about is that we cut out some of the outreach and some of the programs that practitioners need.
Annie Schwab: Absolutely. I was thinking about that just the other day, like all the forums, like, where are people going to go to get educated? Um, the webinars that they put on the the collections and enforcements groups, the IRS advisory groups and the panels, I mean, they play a vital role in, in [00:34:00] maintaining the stability. And I'm concerned. I mean, I don't I'm not saying that those are being cut. I'm just we don't know. I mean, I don't know what something's going to be cut, and I don't know how they decide what goes and what stays, but I can't imagine that some of these outreach programs would not be impacted.
Roger Harris: You know, because one of the concerns I have, and having been having the opportunity to to go to some of these forums and go to some of these meetings is the danger is if you if [00:34:30] you I don't know what they cost, they may not even be on the chopping block. They may be we may get more money, I don't know. But you know, when you start chopping, you feel like everything gets chopped is it's the stakeholders from the outside that bring the real world perspective into the IRS, because we've all seen it where things that make perfect sense sitting in a building in Washington, DC aren't going to work. The most classic example I can think of, because I had to deal [00:35:00] with it yesterday, was when they changed the W-4. You know, we had 100 years, 75 years of people who said, am I married? Am I single? How many people in my house and you filled out a W-4 like S one, M two? And all of a sudden we had this massive new thing that requires you to know how to fill out how many income.
Annie Schwab: Sources.
Roger Harris: Of income it's worth. If you could do that, you don't need a tax preparer. You can do your own taxes. It's easier than filling [00:35:30] out a W-4. And we kept telling them, this ain't going to work. You can't. You can't change people's habits just because you want them to be more accurate. Because.
Annie Schwab: Yeah, we had it was really it still is. We get questions on that all the time. Yeah all the time.
Roger Harris: And I got I had a call yesterday from somebody that said I was under withheld. And I said, well how do you fill out the W-4? And they filled out the top, signed [00:36:00] the bottom and in the middle wrote 15%.
Annie Schwab: Okay.
Roger Harris: Well, so so okay. Well that's not quite how the form works, but there's an example of how if you don't listen to the outside, you spend a lot of time and money to create something that in a theoretical world makes sense, that if we get all these questions, then they'll get the right amount of tax withheld, and they won't get these big refunds that they have [00:36:30] to wait for. They want all these big bills. But but you can't change the way people think after 50 years of doing one thing and then hand them a she said she got a booklet, not a form a booklet, you know, and I'm thinking, come on. So so that's a long way of saying the outside information that stakeholders like you, me, our listeners, our other offices bring to this discussion has got to stay available [00:37:00] because otherwise we're just going to get things that sound like they make sense until you actually try to do them.
Annie Schwab: I mean, I'm not going to say it because we haven't said it yet, but I mean, there another example would be the IRC. Yeah, right. Looked great on paper. Great idea. And that blew up. So.
Roger Harris: Yeah. See, we couldn't make it without a IRC coming up.
Annie Schwab: I know I was trying not to say it. Trying not to say it.
Roger Harris: But that's why when we start cutting budgets and people, there needs to be [00:37:30] thought put into it.
Annie Schwab: Or departments.
Roger Harris: Or departments or whatever. Because I really think, you know, our practitioner hotline, you know, how well is it going to work for us, things like that. So it's not just people, you know, the IRS is such an easy target. I mean, look, it's they're they're the bad guy in everybody's mind. You know, they're the we all think about the guy knocking on your door, taking your money or auditing you and all that sort of stuff. But they are [00:38:00] who collects our revenue and they're not perfect. And I'm not trying to say they are, but God knows what we'd do without them. And if we don't have enforcement? I've always said this. This is my slogan. Because I think if you cut back enforcement enough, I want you to think about it. If you. What's the only thing that keeps you from speeding on the highways.
Annie Schwab: Getting a ticket.
Roger Harris: Getting a ticket? If you knew the State Patrol was never going to be on the interstate. How fast would you drive?
Annie Schwab: Right? [00:38:30]
Roger Harris: And if we know we're never going to get we're almost there, but we're never going to get audited, how much would you cheat? So we gotta have enough support, enough enforcement to make our voluntary tax system work. And so if we're going to cut money, let's do it smart. All right I'm going to shut up. I'm rambling.
Annie Schwab: On. What else? I mean, you made you make a really good point, and there's no [00:39:00] right or wrong, and nobody's going to get it perfectly right. But there We just have to remain hopeful that the decisions that are being made are being made with the taxpayers in mind. The tax practitioners in mind, the agency in mind. And we'll see. See where we land, I guess.
Roger Harris: Here we go. I would hope that we would even have some input, maybe on where things could be cut, what services could be. I don't call them outsourced, but left to the private sector and things like that. We'll see. Yeah, [00:39:30] let's go there. There are some other things. Andy, you know, talk about that the IRS is doing during this tax season that are, uh, potentially helpful.
Annie Schwab: Exactly. One, for example, I saw just about a week ago an announcement that now your your w-2s and your 1095 A's, those are those health insurance marketplace statements. That's what a 1095 A is. Those forms are now available in the online portal. So if you go into your online [00:40:00] individual account you can see those those forms. And to get an account, it's free. You go through an authentication type thing, but it's fairly simple to do. And we do encourage you to encourage your clients to set up individual online accounts. And this is the best news. Let's hope the goal, the goal, the goal of having your 20, let's say 2024. Transcript. In your portal, in your online account is March 31st. So that means that you [00:40:30] could technically pull a transcript of your your a transcript of your 2024 tax information before you even file the 2024 return. Think of all the mismatching and oh, I forgot or I didn't get this. I didn't know where it went. I mean, it would be really nice to be able to see what the IRS has on file and what you have, you know, here to do the return and just the avoiding of minor mismatched statements or forgetting something would be significantly reduced, [00:41:00] in my opinion. And I think, you know, I don't know if they'll make the March 31st goal this year, but I think that's a fantastic thing to strive for. I think it's fairly.
Roger Harris: Confident they can. I mean, it's not March 31st yet so we don't know. But but yeah, that would be a game changer to be able to look at what. Now remember, it's only going to be what the IRS has if someone was late getting information to the IRS.
Annie Schwab: Oh that's true. If your W-2 didn't make it.
Roger Harris: So I mean but but it's going to be everything that they have. As [00:41:30] I understand it, every bit of information the IRS has for tax year 2024 will be on that transcript available March 31st, with one exception that I know people have been asking for for years, and I'm not sure why it's not there, but the state information on a W-2 is not in the transcript. So you can't look on the transcript and see how much state tax was on that W-2 or what the wages were, if they were different. I'm not sure why they can't [00:42:00] do that because they get the but they don't. So you could pretty much do the federal return off the transcript, but you wouldn't know the state withholding. And if there was any difference in the wages, you wouldn't know that. But it's still a leap far leap from. Yes.
Annie Schwab: And maybe they'll get the state stuff in at some point. Maybe that's on the I'm.
Roger Harris: Sure I've heard why you couldn't do it, but I don't remember because I don't I don't get it, but it's not there. So don't, don't look for.
Annie Schwab: The state.
Roger Harris: Information because it's not. [00:42:30] But that again that's going to give you two weeks to either validate returns you're still preparing or look back. If you had a concern about one you've already filed and get an amendment or a superseding return done before the 15th if there's a big omission there or something there, let's hope you know, none of this craziness that's going on with government shutdowns and funding and employee cuts, delays that. But that's the plan right now.
Annie Schwab: Yeah, it would be. That would be a [00:43:00] really nice feature for for tax practitioners and tax payers to be able to to see that. So we'll see.
Roger Harris: And the one thing that's parent online accounts you know are going to be huge for us. The business accounts are getting better. The individual accounts are there. I mean we're just kind of being short sighted. If we don't encourage our taxpayers to have online accounts and our businesses to have business accounts and us to have practitioner accounts, this whole, you know, this whole idea of authorization [00:43:30] and power of attorneys, again, you know, all that works better if we're dealing with online accounts and faxes and, you know, IRS, I guess one of the few places you still fax stuff to.
Annie Schwab: You do and mail in, you.
Roger Harris: Gotta find a fax machine first.
Annie Schwab: Yeah, I guess so. That's true. Well there are. I know we're running short on time, but there are a couple of, um, IRS announcements, so to say. Just, you know, they put out a list of some really just common, basic mistakes that people make [00:44:00] when they're doing their tax returns. And this is more on the, you know, when you're preparing your own tax return. Um, you know, just making sure your Social Security number is exactly shown as the name on the Social Security card. So, you know, if your Social Security card says, you know, John S Martin, then make sure you got that's in there, things like that. Um, filing status that tends to be confusing, um, from time to time with, [00:44:30] you know, especially if you become widowed or you're maybe head of household, but the next year you're single or you get married or you get divorced or something like that, just keep in mind that you are what you are at the end of the year. So if you get married on December 31st, you are considered married for tax purposes for the entire year. So I know that can also sometimes be confusing. And then of course, you've got, you know, people who, you know, math [00:45:00] mistakes. I mean, just math, even though most of it's done online and the calculations are done. But, you know, figuring your deductions and your credits, making sure you put in the right bank account information. We have had times where people have put in the wrong banking account number and they're like, where's my refund? It's just not hitting the bank. And it's because there was a typo. Um, and especially I know most of us gather, you know, e-signatures now to submit the electronic files, but, you know, both the taxpayer and the [00:45:30] spouse, if you're filing a joint return, both need to sign and date. And sometimes I feel like, you know, one will just scribble on there and and send it off. And so, you know, it does require both taxpayer and spouse forms to be signed. Yeah.
Roger Harris: And this sounds stupid, but I can't tell how many times I've been asked this. The fact that if you're single and own a house, you're not head of household.
Annie Schwab: That is true. But it this I can see I can see how someone might question that. [00:46:00] But no, that is not what the definition of head of household is.
Roger Harris: So if you go to a preparer who asks you if you own a house and files you as head of household, you probably need.
Annie Schwab: A new preparer.
Roger Harris: You need to find a new preparer. Uh, one last thing before we wrap up, uh, something else that went on this week, uh, that impacts all of us is. And I think we've talked about this. If not, there has been some proposed new regulations to circular 230, which is kind of our guideline [00:46:30] of how we operate. Uh, you know, uh, what we can.
Annie Schwab: Tax practitioners.
Roger Harris: Can't do best practices, things such as that. Um, this week there was a anytime you issue new guidance like that, there's a public hearing where you can come and either make verbal recommendations or you can submit written recommendations. And we did submit and make comments on one part of it. That hearing was being held this week, and from that hearing, [00:47:00] we will get the final regulations. Uh, we're going to do a podcast sometime shortly. Uh, yeah.
Annie Schwab: Next few weeks probably.
Roger Harris: Yeah. Who attended that hearing? And we're going to talk about what the proposed changes are and what they may mean to you, how the hearing went. We won't have final guidance then, because it may take another months for them to take all the feedback they got at this hearing and incorporate.
Annie Schwab: It.
Roger Harris: And incorporate it and decide what they're going to change, and they'll come out and say, we heard this. We [00:47:30] agreed with this. We didn't agree with that. So here's the here's what the ruling stays or what we change. So but we thought it would be good to bring somebody on and we'll do that. You know, I think on our next podcast to talk about, uh, the broad, if you don't know what we're talking about, we'll bring you up to speed on what those proposed regs might mean to you and your practice and how you have to do things. There's some pretty interesting requirements in there and things that you'll have to do.
Annie Schwab: And then it has it's been so outdated. I mean, it hasn't, you know, it needed some [00:48:00] some modern aspects to it.
Roger Harris: So yeah, it's got to relate to the way we operate today and the realities of where we are. And then our guest did a attend the hearing so we can get a sense of how that went and what topics seem to draw the most attention, which are the ones that would indicate might have the most likelihood to be different than the proposed. And, and I would suggest if you don't know what we're talking about, go look at the proposed regulations and look at how your business is being run compared [00:48:30] to what circular 230 tells you. You know, it should run. A big one is it discusses contingent fees, which was a big deal with IRC.
Annie Schwab: Very much.
Roger Harris: You know, so there's a whole different discussion of contingent fees there. Uh, it even addresses succession planning and planning for disasters and health emergencies in a firm.
Annie Schwab: Technology. They put a lot of stuff about safeties of technology and, you know, ways to avoid, [00:49:00] you know, cybersecurity and all that kind of stuff. So.
Roger Harris: So we'll do that. It's really a it's a bigger and deeper topic than you think. Because if you think about it in the world that we're in where we can't regulate return preparers. So what is a preparer and what can the IRS control and what how do you hold your. There's a lot of really interesting dynamics that it's deeper and harder than it takes a close reading. So we think that'll be an interesting podcast and we look forward to [00:49:30] that. Yeah. What else? Any anything.
Annie Schwab: That's all. No, that's all I got today. I'm just glad that I could finally come here and say something good about boy. Yeah. And we only mentioned IRC for like, 30s. And we've got, you know, some, some good things on the horizon, some good topics coming up, good speakers joining us. So I think I hope that you guys continue to to watch and listen and share and invite your friends and all of the above.
Roger Harris: And one last thing. Our 50th podcast will air on April the 20th, and [00:50:00] we are lining up a special guest to make that one kind of a uniquely interesting one, because we want to thank all of you that have listened.
Annie Schwab: And absolutely.
Roger Harris: I didn't know if we'd make it to 50, but, well, we hadn't made it to 50 yet. We're close, but we.
Annie Schwab: Know we're close. We're going to get there.
Roger Harris: I think we're in the home stretch now, so we're going to have a special guest for our 50th podcast, and I hope this podcast is still relevant tomorrow. Uh, you know, the way things are changing in Washington. You know, if, as Annie did the last time, if something dramatic changes [00:50:30] that makes something we said today, uh, relevant, we'll try to splice that in before it airs. It could happen afterwards. So as always, remember we're recording this on March the 7th. And in today's world, March the 10th or 11th could be a different world.
Annie Schwab: Yes, yes. All right. That's all I've got. Roger. Back to back to tax return preparation.
Roger Harris: Yeah. Annie. Good luck. Let's get through the next. You know. I guess month and a week. [00:51:00]
Annie Schwab: That's it. Month in a week. You got it.
Roger Harris: Month in a week. That sounds much better than April 15th.
Annie Schwab: It does actually.
Roger Harris: Thank you. Annie. Thank you as always.
Annie Schwab: You're welcome.
Roger Harris: My pleasure. For listening. We hope you find this enjoyable. And, uh, we'll come back for our next podcast and maybe bring a friend with you. So good luck the next month and a week, and we'll be back soon with another federal update podcast. Thank you.
