Key Takeaways From Tax Season

What was your biggest “a-ha” moment from tax season? While you may have put a number of clients on extension and tax season isn’t really isolated to just a few months of the year, tax year 2018 was unlike many others in recent history due to the legislation enacted by the Tax Cuts and Jobs Act (TCJA).

We asked this question of several Intuit® ProConnect™ Tax Pro Center authors: “What did learn most from this first season of tax reform to help you prepare for next season?” Here were their responses.

Dawn Brolin, CPA, CFE – Powerful Accounting

I realized that it is more important now than ever to allow time to explain the reasons why the clients’ end result is so much different than in the past. As many taxpayers are paying more in taxes despite the promises of a better result, people came in very nervous and concerned.

Nayo Carter-Gray, EA – 1st Step Accounting

I learned that my firm could have done a better job reaching out to our clients we knew would be the most affected. Although we briefly mentioned the changes we knew were going to make a huge impact on our clients, we didn’t take any extra time outside of last year’s initial tax preparation appointment to stress the importance of planning for the negative impact the new law could have on those particular clients.

I also learned that clients with children were very excited about the child tax credit. A number of our clients with children thought it was a new deduction and not just an increase. This excitement means we should also highlight the positive aspects of the new law.

Renee Daggett, EA – AdminBooks

We prepared for hours on Qualified Business Income (QBI), knowing the complexity of this new rule, but QBI was much easier than expected. However, what we did not anticipate were several other issues that would affect our firm. The first was withholding, so we are now educating clients to adjust their withholding. We also did not realize how the limitation on mortgage interest and property tax would affect the home office deduction. In addition, the mortgage interest and home equity line of credit excess allocation took more time than we expected. As a result, we will closely review Intuit® ProConnect™ Lacerte® and the 1040 instructions to make sure these issues are correctly reported.

Caleb L. Jenkins, EA, CQP – RLJ Financial Services, Inc.

Here is what I learned from tax season this year as a result of tax reform:

1. Invest more in additional education related to tax reform.
2. Continue automating client accounting in QuickBooks® throughout the year so that we have reconciled and accurate books as of Jan. 15.
3. Spend more time with clients outside of tax season, helping them understand what they can do to maximize tax savings from tax reform.

Debra Kilsheimer – Behind the Scenes Financial Services

This tax season was quite different from all the others. With the TCJA, many clients were surprised with the smaller refund and/or shocked for the first time that they actually owed any taxes. What they didn’t understand was the difference between a tax expense and a tax refund. This gave us the opportunity to really promote the tax planning part of our business, and although we offered tax planning sessions to all clients before 2018 came to a close, many clients didn’t think it was necessary to talk about it; after all, what could be different? They heard they were getting a $4,000 bonus.

However, even though they paid in less, showing them their tax expense went down helped them understand the difference and allowed us to further educate them on the importance of keeping us in the loop with their financial lives. Overall, the TCJA was a great opportunity for us to differentiate our firm from other firms. Not only could clients could see for themselves that we are a proactive firm, but that we also we understand tax-related consequences. That makes all the difference in client satisfaction.

Tyler McBroom, CPA – Measured Results

I learned that the updated tax laws were great for small business owners, especially those under the QBI threshold. Next season, I will proactively encourage year-end tax planning to help business owners close to the phaseout threshold get their income to a point that can maximize the QBI deduction.

What did you learn from tax season? Leave your comment below to let us know!