There is one thing that the tax laws of the last couple of years make plain: nobody in Congress gives a moment's thought to what it will be like to actually implement their new legislation. Examples spring very easily to mind.
Do you remember when all those new privacy rules came into effect? Some sources told preparers that merely suggesting to clients that an IRA contribution would save them some money was an unauthorized use of tax return information. Not only that, but such use was subject to a $1,000 fine and a year in jail unless the client signed specific written authorization before the preparer started working on the return. That was a swell idea, wasn't it?
Here’s another good one that was new last year and is still in effect: Say a grandmother claims the Earned Income Credit and is claiming her grandson child as a dependent. Because Grandma is claiming someone who is not her child, the preparer must, as part of EIC due diligence requirements, verify that her AGI is higher than that of her grandson’s parents. Have you tried that one? If so, you know that this is an especially burdensome task. If the grandson's parents aren’t your clients, how are you expected to know their AGI? If they are your clients, does fulfilling the due diligence requirement on Grandma's return constitute an unauthorized use of information from Mom and Dad's return—subject to the $1,000 fine and the year in jail mentioned above?
Oh, and here’s another one: This year, the e-filing mandate requires preparers to send nearly every return electronically. Along with that mandate, preparers have a whole array of scenarios that the IRS computers seem to routinely reject. Raise your hand if you have seen rejections of returns that include the repayment of the homebuyer's credit. Raise your other hand if you have seen returns rejected because the taxpayer is a shareholder in an S corporation and claimed a self-employed health insurance deduction. If I mention Form 2350, several of you are going to have to grow another hand.
What’s a major reason that these rejects have been happening? You got it: poor planning and implementation at the IRS end. In many cases, nothing that you or your software vendor can do will prevent them. And no, you’re not the only one tempted to wonder whether these snafus are the result of Congress’s putting off major tax legislation until about four weeks before filing season starts.
I could go on for pages. My real point is this: It sure would be nice if somebody in Congress would pause to consider the practical impact of new tax legislation before it is enacted. Preparers need somebody in Congress who is on their side. So I am asking you, reader, please consider running for Congress! Yes, if you are the kind of person who would read this blog, you have my vote, and probably the vote of tax preparers nationwide! What do you say, folks?
Somebody please help us out. The rest of us will thank you.
Bob Nolan is an Enrolled Agent and an ASTQB–certified software tester, and is licensed as a Certified Public Accountant in the states of Illinois and North Carolina—but he is not quite as boring as that makes him sound. He has experience in public accounting and used to have his own small tax-preparation business. He was a Drake Software customer before coming to work for Drake in 2006. He is currently a Tax Analyst in Drake’s federal tax development group. When he is not working, Bob enjoys travel, science fiction, old movies, and spending time with his very patient wife and his three children, who have the good fortune to take after their mom.