Accountants may want to stock up on extra strength aspirin this tax season because, in the words of the chief tax officer at Jackson Hewitt, it will be “one for the ages.”
In an interview with Accounting Today, Mark Steber ticked off the issues tax accountants must confront before they even begin a return. There are the stimulus payments, and the details of the CARES and SECURE acts. There have been changes to the rules around retirement plan borrowing and small business loans, and, for those individuals who lost jobs, unemployment benefits and withholding on those benefits.
“There are so many issues to keep front of mind — a lot more to manage this year than any year in the past decade,” Steber said.
And then there are the taxpayers themselves and the surprises they may find.
Steber, and Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting, both predict that accountants are likely to have more than a few clients who believe their unemployment benefits were not taxable or failed to have withholding taken out.
Unemployment is taxable and with the extra $600 supplement so many received last year, those who didn’t have taxes withheld as they do from a W-2 paycheck may be facing a hefty tax bill. Complicating the situation is that some states tax unemployment while others don’t.
Besides the surprise about the taxability of unemployment benefits, Seber said many taxpayers who have been working from home are expecting a deduction.
A survey by his company found 80% expected a tax break for working from home. “But,” said Steber, “The deduction can only be taken by the self-employed. Because of the pandemic, a lot more people have a home office, but a lot more people do not necessarily get the tax deduction for a home office.”
Barbara Weltman, a tax attorney and author of Small Business Taxes 2021, told Accounting Today that the big issue for accountants right now isn’t necessarily taxes but helping their business clients complete the paperwork for the second round of the Paycheck Protection Program.
Said Weltman, “The biggest challenge will be finding the time to devote to counseling on the PPP loans while preparing tax returns.”
Then there are the conversations accountants need to have with their clients, including about fees and the additional work this year’s returns will require.
“These may be time-consuming, so it’s best they are addressed early in the filing season,” she said.
“A lot of the work is automated and practitioners will rely on their software, but they will still be working longer and harder as a result of all the law changes and uncertainties.”