Tax regulations

Not yet: Avoid chaos when new tax regulations come into force

To call it a flood would be an understatement. When Congress passed the Tax Cuts and Jobs Act of 2017, clients inundated their accounting firms with questions, wanting to know precisely how changes in tax law would affect their businesses and, most importantly, what they should do about it. .

I know of national tax offices that have received more than 500 requests per day from field offices seeking to clarify the impact of specific tax provisions on their clients. In response, the company’s in-house specialists released wholesale advice with obscure and complex technical details. Often these technical details were used to trigger more questions.

Overwhelmed subject matter experts were unable to respond to emails and phone calls from the field in a timely manner. In many cases, partners in contact with customers simply had to admit that they did not know and could not give a timeline in which they could provide clear answers.

This is not what business owners expect from their accounting partners. More than a few business owners and high net worth individuals have found new firms to advise them, disappointed by the uncertainty and unsatisfactory responses from their trusted professionals.

And guess what? The Biden administration seeks to advance a range of new tax proposals – some of which are likely to significantly modify the developments of 2017. What lessons can accountants draw from their previous experiences and apply to the next round of tax reform? How to best serve and protect the interests of your clients?

Proactive, not reactive

Especially during a time of significant change in tax laws, clients want to know that their accountants are going to put them in the best possible position to take advantage of new opportunities. They also want to know that they are safe from new pitfalls and potential responsibilities. It didn’t go well with the 2017 tax changes.

The TCJA moved through Congress at the speed of the quick. Lawmakers added and deleted provisions until the final vote, making it nearly impossible to advise clients with any degree of specificity.

The companies that best handled the difficult situation were the ones that overcame the uncertainty.

The key now, as then, is to be proactive. Accounting partners should start working over the phone early in the process. They should check with clients about the upcoming tax review, assure them that they are following it closely, and let them know that they will get back in touch with specific advice soon. It’s also a great time for accounting partners to demonstrate how well they understand – and are ready to deal with – the nuances of each client’s situation.

As in 2017, businesses will not get all the clarity they need even after the next tax reform bill comes into effect. As with virtually any significant piece of legislation, executive agencies will be responsible for drafting regulations to provide more clarity. As the people at the Treasury and IRS, among others, sort through the most important details, accountants and their clients will be left to speculate on what is likely to result.

Show that you have this

Accountants help their cause by laying the groundwork and defining client expectations. The regulatory process is inherently uncertain, but companies are demonstrating their expertise by outlining possible new rules, explaining the comment period, and suggesting when a final version might be released. Above all, accountants must demonstrate their in-depth knowledge of their client’s personal and professional circumstances throughout the process.

While clients may not have all the answers they want, they will appreciate having someone working on their behalf who is ready to act quickly once the stage is set. What to do about the Organization for Economic Co-operation and Development Global Minimum Corporate Tax Rate Initiative, which recently attracted 132 signatory countries? Will the top federal personal income tax rate rise to 39.6% as proposed? What are the best new tax strategies for flow-through entities? Tax partners may not know it yet, but they will soon have a tailor-made strategy.

When it comes to regulatory changes, customers should also be reminded that nothing is permanent. As a candidate, Biden pledged to try to eliminate the Eligible deduction of 20% for business income for the pass-throughs included in the TCJA. Now as president, this provision has faded from his tax agenda. There is an important reminder here. A new administration can act quickly to reverse what a previous administration has enshrined in law.

For accounting firms struggling to stay on top of tax changes, it should be noted that there are rapidly evolving technological solutions that can help professionals navigate thousands of pages of regulations to unearth information relevant to their business. customers, giving them a better set of tools than Ctrl + F for navigating the Federal Register.

There is no denying that the muddled response to the 2017 tax overhaul cost some accounting firms clients. But it also works the other way around: a demonstrated understanding of how Washington works can help develop the practice. With the experience of 2017 still fresh and an intense political polarization promising more egregious tax law proposals, accountants who can establish themselves as regular and proactive guides on the evolution of tax policies will be well placed to attract new clients. through referrals and word of mouth. This is what a skilled tax practitioner looks like today.

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