For most accountants working in 2017, Congress passing the GOP’s tax bill is the biggest shock to the system in their professional career. The legislation, which brings a sweeping overhaul of the nation’s tax code, will mean a tax cut for around 80% of American households, a lower corporate tax rate, and a higher standard deduction, just to name a few changes. On Friday, Dec. 15, accountants across the country downloaded the 1,097-page PDF and started reading the “Tax Cuts and Jobs Act.”
At H&R Block (HRB), the text of the bill immediately circulated to 50 tax analysts who dived in. Accountants for smaller firms sat at home and pored over the text to the chagrin of family members.
Over at Intuit (INTU), which owns TurboTax, “It was a long evening, let’s put it that way,” said David Williams, who worked in the Senate for 15 years beginning his career dealing with President Reagan’s 1986 tax bill before becoming chief tax officer at Intuit. “I used to sit on Senate floor and read these, advising the parliamentarian, so this brought me back.”
Mark Stafford, a CPA in Maryland, got through 400 pages by Saturday morning and was firing off emails to clients, trying to get in the last-minute 2017 moves to take every advantage. It took a few run-throughs: the first for a general sense and to make questions and the second to answer them.
“I had to be careful reading the bills until recently,” he told Yahoo Finance. ”I knew it would change in conference. I did not want to remember some rule that was later deleted so the real reading only started to take place Friday.”
The hurry? Clients need to know stuff and they’re asking questions.
There vast majority of the bill doesn’t affect most people until they do their 2018 taxes — in 2019. “But there’s a handful of things clients want to know,” said Barry Kleiman, a New Jersey accountant with Untracht Early. “What can they do in the next two weeks?”
The list of stuff you could do before year-end isn’t long, and boils down mainly to whether a taxpayer wants to try to take advantage of deductions and if they want to prepay their property taxes in order to claim them as a 2017 deduction. (It’s not even clear this is allowed, and won’t be until the IRS issues rules. Also, not all municipalities will allow it.)
The emails and ringing phones, however, aren’t mostly about end-of-year planning. People really just want to know if their taxes are going to go up, and whether they need to do anything differently in 2018. H&R Block has scrambled to train tax pros to provide guidance, especially on withholding, so taxpayers don’t just receive everything in a refund — money they could have used to pay down debt, for instance.
The volume of inquiries may be higher, but it’s not an unusual situation for an accountant.
“This is usually always a very busy time of year anyway because we’re getting ready for the tax season,” said Mark Ciaramitaro, VP of tax strategy at H&R Block.
“Clearly we are getting inundated with client calls, but otherwise we are taking in stride,” said Kleiman.
It’s still early
H&R Block’s Ciaramitaro noted that the IRS has yet to issue rules on a lot of this stuff, so there is a limit to what’s known and what can be done. But it’s also really early in a very basic way: the date these changes take effect.
“The vast, vast majority and terms and conditions start on Jan. 1,” said Ciaramitaro. “Most people won’t see the effects until they file taxes in 2019.”
This gives a substantial breathing room when it comes to training professionals and coding software. “We have a full year to do that, thankfully,” said Ciaramitaro.
Besides IRS rulemaking, Congress will also have to pass a technical corrections bill to fix the rush job of the bill it just passed, Intuit’s Williams noted. The 1,097-page bill text and 570-page Joint Committee on Taxation (JCT) summary don’t line up perfectly. Corrections bills aren’t uncommon, Williams said, but the speed at which this one was passed certainly was a factor.
So has the bill simplified taxes? It’s hard to say.
“The increase of standard deduction and limitations on itemized deductions mean a significant number of people will no longer need to itemize,” said Williams. “It’s a form of simplification. But facts and circumstances of the individual taxpayer make it hard to boil it down.”
Said another way, it’s clear that accountants are going to be in high demand going forward.