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Return Prep, Software Companies Expect Smooth Filing Season

Posted on December 27, 2017 by William Hoffman

To taxpayers, tax return preparers, and support services freaking out over the GOP tax reform bill’s impact on the 2018 filing season, executives at some of the biggest return preparation companies have a word of advice: Take a breath.

The rushed New Year’s tax reform, combined with the usual anxiety about IRS preparations for the imminent filing season, have amped up concerns among tax practitioners, payroll service providers, and regulation-watchers about tax administration performance in the coming year. But at least among major retail preparers, there appears an almost inappropriate sense of calm.

“I don’t want to minimize the importance of the bill, but we’ve got this,” David Williams, chief tax officer and executive director of Intuit, told Tax Analysts. “This is what we do as part of our core competency. And we are more than confident that our products will deliver what customers expect of them.”

The top executive for the software developer of TurboTax, the nation’s most popular tax return preparation product, said Intuit will soon roll out a “forward looking” service that can estimate a taxpayer’s 2018 tax exposure and compare it with their actual 2017 tax liability for planning purposes.

Mark Ciaramitaro, H&R Block’s vice president of tax strategy, said the late hullaballoo around tax reform appears to have accelerated public discussion about the filing season. “That topic usually starts to enter consumers’ minds in early January,” he said.

Like Intuit, Block is confident in its preparations for the upcoming filing season. Ciaramitaro said the nation’s leading chain of return preparation services will shortly deploy 70,000 tax professionals trained with the most up-to-date tax reform information. “We’ll get started right away” when the IRS announces the opening of the filing season, he said.

Williams said, “For us, it’s important to manage [taxpayer] expectations, so they know they can file their tax year 2017 returns, and that we’ve got their back for both those and for what’s coming.”

However, Ciaramitaro emphasized that most of the tax bill’s provisions don’t take effect until the 2019 filing season. “We’ll be working with the IRS, getting clarity on their rulemaking and on their interpretations of various provisions,” he said. “But we literally have a year for that.”

‘The Bill Is Dramatic’

The IRS did not comment for this article, but officials have been quite public recently about activity behind the scenes.

David Kautter, Treasury assistant secretary for tax policy, told a George Washington University Law School tax forum December 1 that tax reform was slowing progress on projects in the IRS’s new regulatory priority guidance plan. “Tax reform has been all consuming at the Treasury Department,” said Kautter, who has also taken on the role of acting IRS commissioner.

Holly Porter, acting IRS associate chief counsel (passthroughs and special industries), told a District of Columbia Bar Association Section of Taxation luncheon crowd December 6 that plans to finish the 2017-2018 priority guidance plan by the end of the plan year “could shift very quickly” once Congress finished tax reform.

The American Payroll Association sent a letter to Congress December 8 outlining a host of concerns about the new tax bill, from when and how workers would file a new Form W-4 to dealing with repealed exemptions, and including a plea for time to make the transition to the new systems. Senate Finance Committee member Rob Portman, R-Ohio, added his own letter to the IRS December 21, asking the agency to fast-track new withholding tables for payroll administrators.

The IRS provided some assurances December 26 when it released a statement saying that withholding guidance it plans to issue in January “will be designed to work with the existing Forms W-4” and that employers and payroll service providers should continue to use 2017 withholding tables for now. 

Ciaramitaro said, “There’s going to be a whole host of provisions that we’re going to want direction on. . . . We fully expect that the IRS is going to have its hands full . . . dealing with not only 2017 questions, but also 2018 filing questions.”

But Williams, a former IRS executive who headed up the IRS Return Preparer Office, said, “Let’s keep in mind that it’s been less than a week since the final draft of the bill became available. So yes, there’s a lot of stuff moving, but I feel very comfortable with our relationship with the IRS, and their work in communicating with us and other members of industry.”

Worst Is Yet to Come

For tax return preparers, IRS phone service levels have been adequate so far, said John Ams, executive vice president at the National Society of Accountants.

But phone assistance is limited to basic questions, Ams noted. “If you start asking them about the tax reform bill, you’re not going to get an answer to that,” he said.

Clients are already clamoring for answers, Ams said. Small businesses want help identifying and planning their tax exposures for the coming year, he said, while individual clients are asking whether their state income, sales, and property taxes will be affected by the new $10,000 cap on such deductions.

“There’s a lot of education going on among tax practitioners,” Ams said. “And they need that before they can competently advise their clients what to do.”

But Mark Steber, chief tax officer at Jackson Hewitt Tax Service Inc., noted that his company opened its 6,000 retail locations starting December 18 to give taxpayers a jump on their return preparation and filing.

Steber also observed tax community activity gaining momentum as reform took the national media’s center stage. “It does seem we’ve been busier this year” than last, he said. “I don’t know if there’s been a lot more activity, but there have been a lot more questions.”

Ams expressed concern that IRS funding — still up in the air as Congress decides what to do with the budget — won’t be sufficient to meet either GOP expectations or taxpayer needs. “If Republicans are looking for a particular outcome . . . then they had better give the IRS the kind of money that can ensure that particular outcome,” Ams said. “Right now they’re not.”

And Steber expressed confidence that, in fact, the worst is yet to come. “This year is what I’d call a normal, busy year,” Steber said. The 2019 filing season “is going to be crazy time, is what I’m confident of,” he said.