What were the challenges of the 2019 tax season?
When I started working for a local public accounting firm over 40 years ago, taxpayers had a two-month automatic extension to June 15 for individual returns. We could request an additional two-month extension to Aug. 15. At that point, we could request an additional two-month extension to Oct. 15 if there was a good reason. Can you imagine all that paperwork? With those interim deadlines, we encouraged clients to pull their information together during the summer, and returns were finalized earlier. Although there were always stragglers, today’s compressed workload for Sept. 15 and Oct. 15 was less intense for practitioners.
Flip the calendar to 2019 with a six-month extension period, add the additional time to comply with the complexities of the Tax Cuts and Jobs Act (TCJA) and we have two heavy workload compression periods.
Did you struggle with any or all of these complex issues on the 2018 returns?
- Determining if a business is a specified service trade or business (SSTB)
- Reporting information needed on Schedules K-1 for qualified business income (QBI)
- Determining if a small business taxpayer is exempt from the Sec. 163(j) business interest expense limitations
- Wait, do we need to consider aggregation that may make them ineligible for small business taxpayer treatment?
- Are there any international reporting requirements?
- OK, finally, on to the state return: Does the taxpayer’s state conform to the Federal Internal Revenue Code?
- What about nonresident states in which the taxpayer’s business has filing requirements?
- And let’s not get started with Wayfair issues.
I’m in favor of simplicity, and I think we can all agree that the tax law is anything but simple.
When the TCJA became law, tax simplification was a major topic. Pre-TCJA, about 70% of taxpayers claimed the standard deduction. Due to the increase of the standard deduction, along with other changes to itemized deductions, fewer than 10% of individuals are expected to itemize. Tax returns have become seemingly simpler for a large group of taxpayers.
Returns have become more complex for other taxpayers.
- Taxpayers who are subject to the QBI deduction phaseout — these include taxpayers with income from SSTBs and taxpayers with insufficient W-2 wages expense or unadjusted basis immediately after acquisition (UBIA)
- Businesses subject to Sec. 163(j) business interest expense limitation
- Businesses and not-for-profits with employees who provide qualified transportation and parking fringe benefits
And we haven’t even touched on international or state complexities.
On top of rushing to meet deadlines and handling the complexity of tax laws, we make mistakes when overloaded with work. Just as a construction worker must always wear their safety harness, we must follow preparation and review standards.
As we look back on a dynamic tax season this year, remember that we have resources to help plan better for next year. Check out the AICPA’s Tax Resource Library for help in compliance, planning, practice management, as well as ethics and IRS practice and procedures. Look at what is available to help you serve your practice and clients better in the years to come.
Chris Hesse, Chair of the AICPA’s Tax Executive Committee. He’s a tax principal in the National Tax Office of CliftonLarsonAllen. Chris has more than 40 years of experience with regional and national CPA firms and more than 30 years of speaking and training experience before tax professionals on a variety of update topics. He has also testified at numerous legislative committees on tax policy matters and has been instrumental in federal and state tax law changes.
- How to make the best job in America* even better
- 3 signs your client’s investments aren’t tax friendly
- What the current political environment means for CPAs