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Don’t Stop Learning: What the new Tax Bill Means for Tax Education

 

The dust is still settling from the passing of the new tax bill.

The IRS hasn’t updated the tax forms on its website…

AND the start of the tax season is looming.

We’ve been getting lots of questions about whether or not to bother taking tax courses right now. Here are some important things to consider, and some reasons why The Income Tax School has your back!

You still need to know prior tax law

If you’ve started learning tax preparation, or are considering it, don’t wait. Do it now! Tax Preparers still need to learn the basics of the law prior to the 2017 tax reform. Learning how to prepare taxes, applying tax law, and  following the flow of tax returns are necessary skills needed to excel at tax preparation. Gaining an understanding now will allow you to prepare taxes for the current year, and will help you apply changes to the laws.  It also ensures that you can competently amend returns and review prior year returns for correctness and audits.  Several years from now you will still need to know the tax law for the 2017 tax year.

You will get updates from us as the details of the new bill become more concrete. So, if you’re just starting out, we can guarantee that our Comprehensive Tax Course is all that you need to become a successful tax preparer. This year, and beyond!

No one has the information 

First and foremost, everything is up in the air right now. If you go to the IRS website, you’ll notice that there are no updated forms. If the IRS doesn’t have it up on their website, no one has it! There are a few entities out there that have been advertising that their materials are updated but as an IRS approved tax school, we can tell you that is just not the case.

We’ve been dealing with tax law changes for years

Here’s the thing. The tax law changes every year. This year the change is bigger than previous years but we have been dealing with tax law changes for almost 30 years now. Here’s how it works.

1. Congress passes new legislation.
2. The Income Tax School educators and tax pros dive in to study and familiarize themselves with the new information.
3. The IRS makes revisions and edits prior to the start of the tax season.
4. The IRS updates its website with new forms.
5. The Income Tax School updates course materials and issues a free tax law update course to all students.

This year, because the changes are so drastic, we will be offering three webinars to cover the updates to the law.

Taxpayers need you

The new tax bill is 500 pages of changes. Nothing about the new law is simplified – like it was originally reported to be. Now more than ever, taxpayers are going to need the guidance of a professional. Tax professionals should focus their energy in the early months of 2017 communicating that need to taxpayers and clients.

It’s crucial that taxpayers meet with a professional this year to prepare for changes so that they are in the best financial situation possible when the changes go into effect next year.

We’ve been reading through the new bill

Our team of E.A.s and tax educators have been reading through the new bill and are currently updating our course materials while we wait for the final revisions to be made. As of now, the tax forms have not been updated. That means there’s no practical application of the tax laws (because there are no forms).

Don’t give up hope tax pros and future tax pros! We will guide you through these changes and make sure you’re prepared. If you’re currently taking our tax courses, rest assured that you will have everything you need to prepare taxes and the support needed once the new law is finalized.

source https://www.theincometaxschool.com/blog/2018-tax-law-education/

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Don’t Believe These Myths About the New Tax Bill

There’s a lot of information out there about the new tax bill. But not all of it is true. Here are 10 myths to look out for and the truth behind them. Be sure to share these with your clients!

MYTH #1

Taxes will be so simple, you will be able to file on a postcard.

The postcard idea originated with House Speaker Paul Ryan and continues to circulate. The thinking behind it was that by doubling the standard deduction, reducing the amount of tax brackets, and eliminating the need to itemize, that the tax code would be simplified thus making the filing process easier for individual taxpayers.  In reality, the final bill still has seven tax brackets and is extremely complex. It layers new tax complexities on businesses and has a number of new regulations. Only those who understand tax law should try to tackle this bill. That means you, as a tax preparer should be ready! 

MYTH # 2

I don’t need to worry about the new laws now, since they are not applicable to this current tax filing season.

Don’t put off learning the new law. It will be essential this tax season to know what the changes are so you can help your clients plan for 2018. Many changes have to be made by the tax filing deadline. There are things like IRA contributions, W4 changes, and business entity classification changes that will need to be made sooner rather than later to have the greatest impact on 2018.  

MYTH # 3

The penalty for healthcare has been eliminated so clients don’t need to worry about a penalty if they don’t have health insurance.

Actually, the individual mandate for healthcare is not eliminated until 2019. Current rules still apply to 2017 and 2018.

MYTH # 4

Teachers can no longer deduct educator expenses.

It was on the chopping block, but was retained with the current amount of $250 per educator. It will however, limit the ability to deduct more than the $250 as an unreimbursed expense in 2018 as the unreimbursed business expenses have been eliminated for 2018.

MYTH # 5

Clients should have pre-paid their 2018 taxes in 2017 so the $10,000 cap on taxes in 2018 would not have a large impact on my 2018 tax return.

Local counties in many high tax states were slammed after Christmas with many people making tax payments before the year end. However, only certain people will be eligible to deduct them. In order for taxes to be deductible in 2017, they must be assessed and paid in 2017 (even if for tax year 2018). Those that are paid prior to receiving an assessment will not be deductible on 2017 returns.  

MYTH # 6

There is no point tracking medical expenses for those under the age of 65 since the AGI limit is 10%.  

Even though there still may not be a point in tracking medical expenses, the AGI limit has been reduced back to 7.5% of AGI for everyone for 2017 and 2018.

MYTH # 7

They haven’t changed the W4 to adjust to the 2018 tax law, so I’m still going to pay too many taxes from my check this year.

The President has asked payroll providers to adjust withholding tables so that workers will see more in their paychecks as early as February with no required changes from the employee. Employees can make changes as well, but it’s almost too soon to know what to expect from tax reform changes. The good news is that paying too much will result in a refund.

MYTH # 8

With the doubling of the standard deduction, taxpayers will no longer itemize, so their tax returns will be simple and they won’t need you.

Eliminating itemized deductions will not necessarily make tax returns simpler. Many taxpayers must still include other complicated schedules and statements with their tax returns and they have other tax complexities. The assistance of a tax professional may still be required to ensure that the taxpayer pays the least legitimate tax.

MYTH # 9

This tax stuff is too complicated right now, I’ll just file an extension and deal with it later.

Urge your clients that this is not the year to wait. Even though there are likely to be technical corrections to fix drafting errors and loopholes. Let your your clients know that you we be monitoring all changes and that you have them covered. 

source https://www.theincometaxschool.com/blog/new-tax-bill-myths/

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NOW is a Great Time to Start Your Tax Career

Major change will always result in the spread of rumors, myths, and misconceptions. It’s just human nature. The new tax law is no different – it even has the tax industry worried!

We’ve been getting lots of questions from tax pros, tax students, and potential tax students about the future of the industry. In an effort to dispel the myths and put people at ease, Tynisa Gaines, our Assistant Tax School Director, has compiled and answered the most common questions.

With the tax law changes, shouldn’t I just wait until next year to take your tax course?

You will need to know how to prepare or amend those prior year returns based on the laws of each particular tax year. Also, spoiler alert! Everyone does not file taxes by the deadline. Some people may not even file for years.  Many times, clients need multiple years prepared at once. Usually when someone wants to purchase a home or apply for a business loan, they are required to provide a few years of tax returns.  Other times, the IRS or their state sends them a bill because they filed a return for the taxpayer based on 3rd party information that they received. 

Why would I need to know 2017 returns if I’m not going to work in the tax field until 2018?

Many tax offices offer a free review of prior year returns.  This is beneficial for the taxpayer as well as the preparer.  The preparer needs to know what was filed the prior year so that they are familiar with all of the income and deductions reported last year.  It is easier to explain how things change from year to year if the client has questions.  Lastly, it will be helpful to identify any errors in prior year returns.  Especially those that can carry over to future years.

What if I just choose not to prepare prior year returns?

If you are an EA, CPA, tax attorney or other circular 230 preparer with unlimited rights to practice before the IRS, you can represent clients on returns that you didn’t prepare.  If a new client is audited for a prior year that you did not prepare, you would need to know the rules that existed for that particular year in order to help that client.

I can always learn prior years later, why start now?

Many preparers are retiring.  The new AFSP rules, PTINS, ID theft and security woes have already prompted many tax pros to retire and sell their practices.  Tax pros not interested in learning things the new way will retire even sooner.  This provides opportunity for new preparers to obtain new clients, but they will have to understand how to do taxes under the current tax code, and implement any new changes as they occur.

If I take your course which is based on a prior year tax law, how will I learn the new tax reform changes?

We will  include alerts throughout the material for topics being affected by the new tax law changes.  Until the IRS starts releasing “official” information through Publications and form instructions, we really can’t use 2018 information to teach the course.  We need forms, instructions and publications relevant to the changes in order for students to complete reading assignments, tax returns and answer research questions.  

Editor’s note:  Tax laws are always changing.  The best way to learn taxes is to learn now, and adjust to changes. At the time of this publication in January 2018, the IRS had not finalized 2017 tax forms.  Therefore, any tax courses taken will always be a year behind.  Tax updates are always provided to review any current tax year changes that will be implemented.

source https://www.theincometaxschool.com/blog/start-your-tax-career-now/

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How to Price Your Tax Preparation Services

 

“The buyer is entitled to a bargain. The seller is entitled to a profit. So, there is a fine margin in between where the price is right.” – Conrad Hilton

Ready to start your tax business for the 2018 season but wondering how much to charge? It can be difficult to price your own services. If you’ve done any market research you’ve likely discovered that the cost of preparing any tax return can vary dramatically among different tax practitioners.

Many tax preparers charge by the hour, others operate from a standard schedule of charges, and some simply charge “what the traffic will bear.”

IRS Laws

One thing you cannot do is base the price of your services on the amount of tax refund realized by the client. Not only is it illegal, it’s a poor way to do business.

Determining Your Fees

Deciding how much to charge should be based on a number of factors:

• Your level of knowledge and experience
• Your overhead
• Price elasticity
• How much your competition charges
• The national average pricing

Knowledge and Expertise

If you are just starting out and looking to gain market share, it’s a good idea to charge a bit lower to attract clients. Be careful not to undercut yourself too much. Significantly lower fees are a red flag to potential clients.

If you have been doing taxes for a number of years, have built up your tax knowledge and/or have credentials, you can charge a lot more for your services. It’s one of the great benefits to getting an advanced tax education.

Your Overhead

It’s important to charge enough to cover the costs of doing business while still making a profit. Are you paying for office space? Do you have employees? How much are you paying for your tax software? Make sure you consider all of your expenses before determining your fees. Tax preparers who work from a home office have significantly lower overhead than those who have a storefront and thus can afford to charge lower fees.

Price Elasticity

Consider what your overhead may be a year or two from now before you charge lower fees. If you work out of your home but plan to move into a storefront or professional office in the future, your fees need to be adequate to cover your new expenses. It’s easier to lower fees than it is to raise them.  However, you don’t want to charge too much. It’s a very delicate balance.

Your Competition

Shop around your competition to make sure you understand your local market and are competitive in your pricing. You can do this by calling around and asking for quotes or by having family and friends do so.

The National Average

It’s important to also know what the national average pricing is so you have a baseline for where your pricing should be. National tax preparer price surveys are conducted annually by some of the tax professional associations such as the National Association of Tax Professionals.

How to Charge

There are two main ways to charge as a tax preparer: by the form or by the hour. The national tax firms charge based on the tax schedules and statements required to prepare the client’s returns. The way in which you determine your fees will depend on your business.

Charging by the form is the fairest way if you employ tax preparers. It’s equitable to them because some tax preparers are slower than others. It’s also fair to the client, who would not appreciate being charged more simply because their preparer is slow.

Charging by the hour is more appropriate for a sole proprietor but could actually undercut your services if many of your clients need only basic tax preparation.

For more on the pros and cons of charging by the form or the hour, check our blog post: Charging by the Form vs. by the Hour.

For an in-depth look at getting started as a tax preparer, starting a tax business, and pricing your services, check out my new book, Guide to Start and Grow Your Successful Tax Business. In it you’ll find sample pricing, tax office operating systems, strategies and best practices that I used when I build my own tax business.

source https://www.theincometaxschool.com/blog/how-to-price-tax-preparation-services/

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Tax pros buzzing about the new tax laws

Tax Reform - A few provisions in track changes

I often find it helpful to see how tax legislation changes existing Internal Revenue Code sections. So, I took a few and made the modifications called for in P.L. 115-97 (12/22/17) (the Tax Cuts and Jobs Act), and show how they change the relevant Code section using track changes.  I also include the effective date information.  For the changes to 448, I also include a caution about how the favorable methods changes don't apply to "tax shelters" which could include some limited partnerships and LLCs even though they don't act like a typical tax shelter.

Here are the ones I modified:

Section 1 - tax rates including kiddie tax change

Section 62 - changes to AGI

Section 163 - changes to mortgage interest and the new interest limitation for non-small entities (and tax shelters - see comment above)

Section 274 - changes to entertainment, meals, travel and awards

Section 448 - changes to broaden availability of the cash method of accounting as well as similar changes to unicap (263A), inventory (471) and certain construction contracts (460(e))

Section 451 - changes to timing of income for accrual method taxpayers

Section 1031 - restricts like-kind exchanges to non-dealer real property

Hope you find this useful.  Note, these are just a few of the many changes in P.L. 115-97!

Also see historical links here.

What do you think?



source http://21stcenturytaxation.blogspot.com/2018/01/tax-reform-few-provisions-in-track.html

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