Posted by Guest Blogger on Jul 29, 2015

Reflections on Tax Season

As we head into the second part of the 2015 filing season (with the 2016 season not far behind), some thoughts come to mind. Many practitioners felt as though recent tax law changes and related guidance was vague, late and not well supported. As a result, the 2015 filing season was more demanding than previous seasons, with uncertainty surrounding the final “repair regulations,” complex financial products and late receipt of client 1099s and brokerage statements.

With a fixed tax deadline, we had less time to prepare and process returns and extension payments. Being proactive now can help tackle these and other common challenges, such as those below.

The Culprits

The Tax System

  • Last year’s question from high- income clients repeated itself this year: “Why do I owe more tax?” Four main reasons were the phase-out of itemized deductions, the personal exemption phase-out, the additional Medicare tax and the net investment income tax.
  • “What takes so long to prepare my return?” they also ask. For starters, Congress’s late action on tax laws, short-term extensions and laws that cannot be administered. Reduction in IRS funding and the IRS’s choices of how it allocated resources led to reduced services, making it extremely difficult to resolve client issues.
  • “Why is this penalty so high for such a small issue?” The penalty regime continues with every new piece of legislation. Last year’s extender package included indexing of penalties and the current highway funding bill includes more revisions of penalties.

Identity Theft:  We can expect identity theft problems to continue because there will always be thieves. More than half of all CPA firms responding to a recent national poll had clients who were victims of identity theft this year.

Client Investments:  If the stock market continues to rise, so will the number of clients owing money. The rising stock market in 2014 caused increased investment income, making returns more complex, and taxpayers were more likely to have a balance due. Some 1099 providers were given extensions to file those returns until after March 20, precluding any reasonable expectation that we could prepare and process the 1040 or an adequate 1040ES for April 15.

There’s no indication that 1099 extensions won’t be granted next year, making the last few weeks hectic organizing investment income for the return.

Going Forward

Client Communication:  Start communicating now with your clients on these issues. Client expectations is one of the most difficult areas in practice now. The abundance of financial products available means that clients of modest means can now buy financial products previously only available to sophisticated investors, complicating their tax returns.

While it  takes the same amount of time to enter a $10,000 unit in a partnership as it does a $100,000 or $1 million unit, the preparation associated with complex financial products or even small stock trades, adds time and effort that we cannot really determine until it comes time for the final bill. Adding to the time is the fact that clients often do not understand the tax implications of the investments they have purchased.

Identity Theft:  Educate clients about identity theft prevention regularly. There is more identity theft and it is harder to detect, sometimes panicking clients and delaying refunds. While the IRS has devoted copious resources to catching identity theft from federal tax returns, some states with an income tax may be particularly vulnerable.

So, the lessons we learned from this season are clear:

  • Begin preparing for tax season early.
  • Consider hiring seasonal employees.
  • Prepare clients for the risk of identity theft.
  • Educate ourselves on the most current legislation and IRS penalties. IRS practice and procedure issues will consume more of our time.
  • Educate clients about the rising complexity and cost of preparing returns.


Gerard Schreiber Jr., CPA, is a partner with Schreiber & Schreiber CPAs in Metairie, La., specializing in tax, accounting and consulting matters for individuals and small businesses. He serves on the AICPA Tax Practice Responsibilities Committee and has authored numerous courses and articles on various tax subjects. 

Valrie Chambers, CPA, PhD, is an Associate Professor of Accounting at Stetson University in Celebration, Fla. She has more than a decade of public accounting experience as owner/partner-in-charge of a CPA firm in Houston that specialized in advising small business owners. Dr. Chambers has been published in numerous journals and received the Texas Society of CPAs Outstanding Accounting Educator Award for mid-sized Texas universities in 2012. She has volunteered for the AICPA and the IRS’s Volunteer Income Tax Assistance in Corpus Christi.


(from AICPA.Insights®)

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