One valuable exercise to sharpen your skills as a tax professional is practicing tax returns. Whether you are new to the profession or want to refine your keen skills, practicing returns can deepen your understanding of varying tax affairs, reinforce your experience, and expand your confidence. There are many practical outcomes to incorporating this practice into your repertoire, so we at Drake Software have outlined in this post some rationales for practicing returns as well as useful resources for your advantage.
Profitability of Practicing Returns
Tax preparers may have many motives for practicing tax returns and can profit from this exercise in a multitude of ways.
1. Accuracy and Compliance
Practice returns provide an opportunity for tax professionals to renew their grasp of laws and regulations, which in turn helps ensure accuracy when it comes to submitting true client returns. This compliance with mandated tax laws both serves your clients as they entrust their returns with you, as well as benefits your reputation as a qualified professional in tax preparation.
2. Confidence and Efficacy
Tax preparers can gain a sense of confidence and unmatched expertise as they exercise their skills by practicing tax returns. Familiarity with differing scenarios will only serve to enhance your abilities as a tax professional, preparing you for a variety of different situations you may encounter in your field. This level of preparation can also help you complete client returns with more efficiency, as you will have the tools to streamline how you navigate extenuating and unique circumstances.
3. Identifying Potential Errors
Practicing tax returns can enable tax preparers to identify situations that may precipitate audits or penalties for their clients. Being equipped to exercise such foresight can not only help you minimize tax liabilities but can also improve your relationship with clients as they learn to trust your expertise and protection of their finances.
One consistent factor in the tax industry is the frequency of changes made in tax regulations. You can practice returns to proactively support your knowledge of any law updates and ensure your understanding is reliable. Maintaining this relevance in your services will help you anticipate any implications of new mandates and better serve your clients.
5. Professional Development
By nature, tax professionals must pursue ongoing education and development to be successful in their roles. Practicing tax returns can help you practically apply the concepts you learn as you maintain certifications and attend training. Seeking growth in this professional realm can increase career prospects and establish your reputation as a trustworthy, educated professional. For more information from Drake Software about other development opportunities, check out our blog posts on certifications for tax preparers here Certifications for Tax Professionals - Drake Software Blog Team (drakesoftware.com) and IRS CPE requirements for tax professionals here.
In sum, honing your skills with practice returns is an essential method of increasing your marketability as a tax professional, increasing your capacity for success, and ensuring compliance with ever-changing tax regulations.
Updates to Know Before Practicing Returns
To effectively practice tax returns, it is necessary to pursue an up-to-date understanding of the latest tax regulations, as well as maintain ongoing knowledge of any updates. This will help you certify your compliance and provide the utmost and most accurate services to your clients. Read on for a sample list of recent tax laws, many of which were inaugurated in our post-pandemic society, that you may need to review before successfully utilizing practice tax returns. You can find many more helpful resources at IRS.gov.
1. Tax Cuts and Jobs Act (TCJA)
Introduced in 2018, the TCJA implemented significant changes to the federal tax code by refurbishing individual and business taxes. Understanding the implications of this Act on deductions, depreciation, expensing, and tax credits can help you precisely prepare tax returns and help you complete practice returns. If you would like to read more about the TCJA, visit the IRS web page here.
2. CARES Act
The CARES Act implemented several provisions affecting taxes after being enacted in response to COVID-19. Consider the effects on economic impact payments, unemployment benefits, retirement account rule changes, and charitable contribution deduction modifications to better serve your clients. The U.S. Department of the Treasury offers more information about the CARES Act here.
3. Consolidated Appropriations Act of 2021
This new legislation brought additional changes to the tax code, seeking to provide stimulus relief in response to the coronavirus pandemic. Be aware of provisions like the extension of certain tax credits (e.g., the Earned Income Tax Credit, Child Tax Credit, etc.), the temporary 100% deduction allowance for business meals, and the extension of certain business tax breaks – and the ensuing updates. For more information, visit this link to read the full bill established by the U.S. Congress.
4. American Rescue Plan Act (ARPA)
Signed into law in 2021, the ARPA initiated several tax-related provisions to aid in efforts for pandemic recovery. You can read the full bill here on the U.S. Congress website. Regarding this legislation, we recommend staying informed about modifications made to stimulus payments, expanded child tax credits, and changes to the premium tax credit for health insurance.
5. SECURE 2.0 Act of 2022
Building upon the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, the SECURE 2.0 Act of 2022 seeks to improve retirement savings options. The Act entails provisions to support savings, boost business incentives, and offer flexibility in saving for retirement, such as automatic 401(k) enrollment, increasing the age to draw from required minimum distributions (RMDs), and other significant tax benefits for employers.
As always, tax laws are subject to change, so regularly consulting reliable sources to stay updated will guarantee your compliance and success. By staying informed, you can navigate practice returns with confidence, as well as provide accurate guidance for your valued clients.
Putting It into Practice
Remember, practice makes perfect, and dedicating time to practicing tax returns will ultimately enhance your proficiency as a tax preparer. Drake Software offers practice returns to Drake users as part of their included training package as we know this practice is helpful in preparation for tax professionals, particularly during slower seasons of the year. Stay committed to continuous learning, stay up to date with tax laws, and leverage available resources such as practice tax returns and case studies to refine your skills. With dedication and practice, you can provide exceptional service to your clients and build a reputation as a reliable and knowledgeable tax professional.