There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Roger Harris: Well hello and welcome back. It's another federal tax update podcast. It's Roger and Annie and Annie. It's after April 15th. How you feel?

Annie Schwab: It's the 17th and I feel great. I feel great yesterday. I felt great today. So we're we're off to a good start. Hopefully our listeners here have gotten through tax season, at least the first part of it, um, and are doing something [00:00:30] fun and fantastic this weekend. Um, I'm sure you all deserve it.

Roger Harris: Yeah. Hopefully that a little time has passed before you actually listen to this because you are somewhere enjoying some some days off. But before we kind of get into the topic, Annie, you talked you're more involved in the day to day tax season with our offices. General impression as you sit here, as you said on April 17th, how do how do you think and how do you think our people think it went?

Annie Schwab: Generally, let's say it went more smoothly [00:01:00] than I anticipated, just with all the additional tax law changes and perhaps the late finalization of the forms and whatever tax software that you're using. I'm not shocked, but I do think that most of our tax practitioners got a lot of extra questions this year as it relates to overtime and tips and some of the other new legislation. So far, though, I think based on the numbers that I've seen come out, I mean, I think they're processing returns and refunds quickly. [00:01:30] Um, this year we had a lot of extra schema errors, but I think that also comes through additional, um, additional ways of trying to prevent identity theft and fraud and those kinds of things. So even though it might have been a little bit annoying to have to go back and double check a couple of things, I think it's probably for the best. According to the IRS, it was a great filing season despite their lack of resources, at least what I've read in the last two days. Um, it seems like they're pleased with their performance and the numbers [00:02:00] are looking good.

Roger Harris: So yeah, and we'll talk about this. As you could probably imagine, this podcast is going to be a lot of post tax season kinds of things. Uh, some numbers to Annie's point that we, we have gotten access to some reminders, some what to do now that we're after tax season, you know, we're going to remind you of something that we covered on a podcast earlier, mainly because the time for addressing it is short and just anything else we come up with for the next 50 [00:02:30] minutes. So, um, Annie, why don't you kick us off with just some of the, the things that you, you know, again, don't know when you're listening to this. So some of this may have already time could have passed, but let's just give some kind of heads up and things to be careful of. Now that we have all taken a deep breath and gotten through April 15th, sure.

Annie Schwab: I'm happy to do it. Um, so I would like to remind everyone, regardless of what tax software you're using or how you filed your returns, there [00:03:00] is this perfection period. Um, and it's nothing new. This is definitely not new. It's been around for a while, but what it means is if you filed a tax return or an extension, depending on the form that you filed. So let's just use a 1040 as an example. Let's just say that, you know, it's the 15th and you press the button and there goes the return and you maybe take a day or two off, um, come back in and you see that it had been rejected. There is what's called a grace period, a perfection period where you can resubmit, [00:03:30] obviously correct the error and then resubmit the return within a certain time frame for the 1040. It's a five calendar day time frame for both the return and the extension. But you can resubmit and it will be considered timely. You're probably listening to this after, you know, your five day window for the ten 40s. You've got a ten day window for the 1120 series. So it just sort of depends on whether you're like a five or a ten day period.

Annie Schwab: But I will say, even if you don't submit that return again during the grace period, [00:04:00] your software should have documentation of you of the submission, even though it was rejected. It will. There's something you can print, should be able to print from your software to show that you. You know, it was timely filed. And that's what you're going to need to hang on to. If for some reason you didn't resubmit during the perfection period and your client gets a late filing, late payment, whatever kind of notice, you might be able to abate the penalties or interest associated with that by proving that. Okay, well, we did, we [00:04:30] sent it through. There was an error, which we then corrected. Even if it wasn't in the grace period. Generally, the IRS will consider that return timely filed. So as you kind of go back to your office and you're checking your file status, keep that in mind just in case something, you know, got messed up, got rejected. You didn't fix it in the time frame. There is another way to help you get rid of those late filing penalties.

Roger Harris: But even that, they'll eventually run out of patience with you if it's August, you know, and we we [00:05:00] had a case. And so and again, I don't know when you're listening to this, let's say you you took off and spent a month at the beach after April 15th.

Annie Schwab: Sounds lovely.

Roger Harris: Yeah. Sounds like a I wish I was there. Uh, um, there was one case that we know where people forgot to check it in time. Really went for a while, and by the time they caught it, the late filing penalties and interest had added up to over $19,000. So I don't care when you're listening to this if you haven't checked your file. Good point. [00:05:30] Next time you're back in the office, go check it because to Annie's point, you might be able to apply reasonable cause abatement to it if it's done fairly quickly. If it drags on months, it's going to be hard to say, well, I actually did it right, but I didn't because it got rejected and it took me five months to realize it. The sooner you can address it, the better. So again, if you're hopeful, you're out enjoying yourself, but somebody's checking that, uh, e file. Whatever software you use, however [00:06:00] you do that to make sure that there aren't any rejections lingering. So even if it's late after the correction period, address it and you got a better shot. Okay. What else?

Annie Schwab: Um, and then always after any sort of big event or deadline of sorts, we always encourage franchises, our franchisees, plus, you know, all of the practitioners to evaluate your tax season. I know you're tired. I know you don't really feel like dealing with it, but right now is going to be the best time [00:06:30] to sort of take inventory of what was good, what was bad, what needs improvement. Um, you know, successes, struggles, those kinds of things because it's fresh on your mind and you have, let's just say a slower couple of months coming up that you could implement change if necessary. Um, so there's certain sections of your business, I encourage. So how did the firm as a whole, um, do. And that could be. Did you file more, fewer extensions? Um, I feel like our franchisees probably filed a [00:07:00] few more extensions just because of the new tax law, but we sent out a survey. We haven't gotten our results yet. So I could just, you know, be guessing, you know, did you have more returns filed, um, during this time frame? Meaning did you take on some client extra clients or did clients leave? And if they did leave, was it as a result of maybe raising fees, maybe you didn't raise fees, maybe you should have raised fees. But that question is something that, you know, is something that you should answer for yourself to see if you're progressing [00:07:30] the way that you want to.

Annie Schwab: Um, another thing I always say is, you know, how was your work life balance? You know, every I doubt anybody goes into tax season going, I work more hours this year. You know, that's not exactly what everybody is hoping for. So most of the time people will set a goal like I'm not going to work on Sundays. I'm not going to work late this time. I'm not going to miss my son's basketball game, etc., etc. and so if you did sort of track the days or the hours that you were spending, you know, was that more or less than last year? Is it doable? [00:08:00] Did it put a strain on your on your health, on your family, etc.? And if you set boundaries, which I hopefully, you know, I hope everyone did you know whether that be boundaries for yourself, boundaries for your clients. Did you stick to them? Um, and maybe not, maybe not perfect. Um, but did you do better than last year? Did you hold yourself accountable? Did you stick to the boundaries that you set related to your clients? I'm not answering the phone over the weekend or, or whatever the case may be. Um, I do think it's important for, you know, to look at your firm, [00:08:30] look at your life balance. And then there's two other sections you can probably guess, um, how did your staff perform? Were they, you know, properly assigned? Were you understaffed? Did somebody have bandwidth? Um, maybe who was the bottleneck? Oftentimes it's the owner.

Annie Schwab: I will say, but you know who is the bottleneck, who maybe needs training? Maybe things can be shifted around, sort of evaluate the workflow. Um, where was, where was your struggle? What worked? And then lastly, to look [00:09:00] at your clients. So not every client can be the perfect client. Not every client can be friendly and timely and all the things. So if you're looking through your book of business, if you're looking through your client list and you know something pops out at you like, gosh, this client is so annoying. There's so many emails, so many phone calls. I ask him to bring it. They never bring it. It's always somebody else's fault. Or maybe tried to raise fees. And these people just they keep bringing me more work, but haven't been able to get to a price point that matters. Maybe it's time to let [00:09:30] them go. Um, and I say training for your staff and training for yourself. Your clients might need training too. Um, there are a lot of procedures that you implement in your office to help things run efficiently. And if you have certain clients who just don't abide by those, bring it in by a certain time. Show up for the meetings that you have scheduled or phone calls that you have scheduled. Probably that client either needs additional training or perhaps maybe that client is not a good fit for your for your practice.

Annie Schwab: So those are kind of like the four big buckets that I [00:10:00] usually ask. And then there's some other suggestions like meet with your staff and get a perception of how the tax filing season went. Get their feedback or send out a client survey, get, get a survey, get some, some input back from, from your clients. I always encourage people to ask clients who maybe went above and beyond for to write a review or to consider a referral program. If you have a type of client that you would want 100 more just like this, you know, maybe they're in an industry where they can, you [00:10:30] know, participate in a referral program to get you some additional clients in that realm. And then lastly, as always, technology is always changing. So, you know, evaluate your current tech, stack your current workflows? Is there something out there new technology that would make your business more profitable or more efficient, or your life easier? Um, there's all kinds of new developments happening on the day to day. I know AI is also, you know, a big part of, of tax [00:11:00] season, so to say. Um, so just things to think about. Um, it doesn't have to be anything formal, but I think you'll benefit if you go through the exercise. Post tax season and, and actually implement change where it's needed.

Roger Harris: Yeah. I think two, two things I would add to that also, one thing I would would ask you to look at what is your receivables from tax season. Is it is it more. Is it less? Why if it's up why is it up? Because, I mean, again, I really don't understand why [00:11:30] we should have a lot of receivables in that kind of business. I mean, you know, the project's done when they pick up their return. You know, why aren't they paying for it? Because a lot of people say, well, I'll wait till I get my refund. Well, what's that have to do with anything? So. So check your receivables because if that's continuing to grow or if it's too big a percentage of your overall revenue, then I think you need to that's one thing you need to address. And the other thing is it's important that you do this now right after tax season, because time has a [00:12:00] way of making problems go away, you know? Well, you know, if you wait 30 days, well, that wasn't as bad as I thought it was. So while you're, I guess, still wound up as tight as you are, is the time to really get honest assessments about how things are going.

Roger Harris: Because you can't expect things to change if you don't look at what you need to change and identify them. And I think one point Andy made is really important. Your staff's going to have a different perspective than you are, and it's important [00:12:30] to hear from their side what went well and what didn't go well. And hopefully they can be honest that if you were part of the problem that they'll tell you that because at the end of the day, this isn't a profession that requires us to kill ourselves to make money. So we need to continue to work towards. And we're not going to do this in one tax season or in one week, but work towards having a better work life balance without sacrificing the revenue and the customer service [00:13:00] that we want to provide our customers. But, but do it now while it's fresh. Uh, because I promise you, if you wait and do this in August and September, you will discount a lot of these problems because they're not fresh.

Annie Schwab: And you don't have much time to implement a change, right? Yeah.

Roger Harris: So this is, you know, I guess if you get mad, you're supposed to go cool off, but this is a little different. Don't cool off than you've done an assessment. So you really know, um, what the, what the [00:13:30] issues are. Um, what else do we need to do about the, anything else on the filing season that just ended. Well, we'll get into some numbers and some things like that. But as far as advice to our listeners.

Annie Schwab: Yeah, I mean, you know, I just gave you a whole list of things to go, to go and do and I should have on that list to take some time for yourself. Enjoy, you know, spending time with your family or friends. Um, you know, it is a stressful time. And so, you know, take, don't take that for granted. Be, be kind to yourself. [00:14:00] Um, but also stay organized. Yeah. Get your stuff done. Don't let all these extensions sit there until mid-summer. Um, do, do continue to make progress, but, um, you know.

Roger Harris: Yeah. And I think extensions is a good place to look. Why? If you have a lot of them, why is it because you don't have the capacity. Do you not have clients trained well enough? Or is it just the nature that there's just information? But because, I mean, if you really want tax, you know, we [00:14:30] joke that tax season ended on April 15th, but that's not true. I mean, we all know that there are other deadlines and then there are extensions. But wouldn't it be better if we had most everything done by April 15th? And, uh, particularly if it's a client issue, you know, you got to decide, can I get this client to cooperate or do I just need to replace them?

Annie Schwab: Yeah, that's a hard question too, because the idea of losing a client never sounds good. But at the same time, if you're [00:15:00] not making money on the client, then that's actually a benefit to the company. And you can go out and find a client that you know will participate in the things you're asking and will pay your price that you're requesting and, you know, follow the protocols of your office. So don't sell yourself short. There's always good clients out there.

Roger Harris: Yeah. And it's particularly important if and we hear this a lot from from people both inside and outside of Paget, they won't take on new clients. Well, [00:15:30] if you're getting people calling you wanting to become your client and you aren't in a position to take them. That's a huge problem because it's these new clients that might, because none of us want to give up a client and give up the revenue of that client. But what if you could give up the bad client and replace them with a good client that pays you the same or more, but doesn't bring the problems? That's only going to be available if you're willing to bring in new people. So if you turn everybody away at the front door during tax season [00:16:00] and they go somewhere else, you know, those could be the not the complete, maybe not the complete solution, but could be a big way to, to clean up your, your clients. Right. Or give you the courage to at least, you know, because sometimes I think we say we have rules, but we don't have the courage to enforce them because we don't want to lose a client. Well, if you've got another one to replace them, who cares? Particularly if they pay you more easy to work with. So again, this is the time to to make changes or at [00:16:30] least develop the plans for what changes need to be made so that unless you thought that, you know, now, look, if this was the best tax year you've ever had, you didn't work any extra hours. You made more money. Things went great. Then go to the damn beach and stay there. As long as you want to celebrate you, celebrate you. You got it all fixed. But if you. If you have challenges, most of us do. Now's the time to try to figure out how to. How to work on them and not make them go away, but make them get better.

Annie Schwab: I [00:17:00] like it, I like it. So hopefully that was a pep talk to, uh, to get you guys moving. Um, there's something else you're going to have to start moving towards. Um, we have a, let's say new deadline or new date kind of lurking out there. Um, Roger, I'll let you explain the coin case. Um, I know we brought this up two podcasts ago, I believe.

Roger Harris: Um, yeah, we did a podcast. Annie was, as I think I said on that podcast was on special assignment. She was actually on spring break. But yeah, [00:17:30] we yeah, yeah, we had two attorneys from the Frost Law firm and, uh, and the reason we're bringing it back up, even though we dedicated a whole podcast to it, is we know that during the filing season, you don't have the time or make the time to go listen to certain things that are going on. And, and this is something that I think is, could, could be hugely important to a lot of our clients and to us, but we do have a short time frame. So I'm going to try to go through it, kind of repeat [00:18:00] or summarize what that podcast is. I would encourage you to go back because the two attorneys we had from Frost were terrific.

Annie Schwab: And they were.

Roger Harris: They'll they'll get into a little more detail. But basically what we have is Quang, that's KWONG, because I was pulling up something the other day and I pulled up something that was just KONG, and that was a completely different case.

Annie Schwab: Wrong one. That wasn't it.

Roger Harris: I started reading and I went, this I don't, I don't get this had something to do with some guy who overstayed his visa and got locked up. And I'm thinking, [00:18:30] oh, how did this turn into a penalty relief? But I realized that W was missing. But anyhow, here's what happened. It goes back to the pandemic and the government declared us in a in a disaster arrangement. And we were, you know, when think about this, back when 2020 was around, we were in a disaster declared by the federal government. That disaster technically was ended when President Biden said it was, [00:19:00] which I don't know the exact date. It's 60 days behind July the 10th, whatever that was. Because the way the law works is when the disaster ends, there's 60 days before the deadline. So President Biden gave a speech sometime, uh, in if it was July, that would make it June, May of.

Annie Schwab: April.

Roger Harris: May, sometime May, and declared the Covid disaster over. Now why does that matter? Because in the case [00:19:30] of disasters.

Annie Schwab: I think federally declared disaster.

Roger Harris: Federally declared.

Annie Schwab: Disaster. Right.

Roger Harris: Deadlines for filings and payments are extended until the disaster ends. Now, during this time, though, the IRS, if you remember, they extended the deadline in 20 for filing taxes. And they they arbitrarily extended some deadlines and based on whatever those deadlines were. And now let me let me take one step. We're talking about income tax. We're talking about payroll taxes. We're talking about IRC [00:20:00] claims. We're talking about nonprofits. We're talking about everything.

Annie Schwab: Individual, corporate.

Roger Harris: Individual, corporate, whatever. The issue is not the kind of tax. It's the deadline to that would have made it be late. So the IRS was assessing penalties on deadlines that were set during the pandemic. That. What this court case did is it went to court. Uh, gentleman by the name of Quang went to court [00:20:30] and said that nothing could be late before July the 10th of 2023, because that's the date that would have been effective based on the end of President Biden's declaring the disaster over. And he won. So what that means is if you have any client who got a late filing penalty or interest or interest on an underpayment during this time frame, January 20th of 2020 through July [00:21:00] the 10th of 23.

Annie Schwab: Yep. You got it.

Roger Harris: Those penalties were not lawful. I'll use that word with quotes around it, and you are entitled to a refund of that amount as long. Because basically what this did was it set the deadline for everything of July the 10th of 23. So anything that was deemed late before that wasn't late. As long as it got filed before that. July 10th. Well, [00:21:30] yeah. July 10th of 23.

Annie Schwab: 23.

Roger Harris: So now we fast forward. There's a three year statute on that, which makes it July 10th of 26 is the deadline for getting those penalties paid back to you. So we do have a narrow window here to file. And what you do is you file a form. 843 um, most of you have probably done some of that in your lifetime.

Annie Schwab: Um it's a request for refund or abatement or abatement.

Roger Harris: Um, you have [00:22:00] to file one for any, like if there's a 941 penalty and a 1040. You can't put them on the same form. You got to file two different ones. It requires an actual wet signature. So it has to be mailed so you can't file it electronically. Um make sure you reference the Quon versus United States is the reason you can't just say I want a refund of my late payment penalty. And don't tell anybody why. Now, let me let's make you aware of this, because there's some there's I don't know, there's risk. There may not be reward. The [00:22:30] IRS said this this court case was in November of 2025.

Annie Schwab: November 25th. Yeah.

Roger Harris: That's when the court case was settled or not settled, but ruled on. The IRS has indicated they're going to appeal it.

Annie Schwab: So it's been pretty quiet about it.

Roger Harris: Yeah, they've been really quiet about it because I think it's probably going to be impractical to get the thing appealed if they go through with it before July. So you at least want to get your 843 in the system process. Yes, [00:23:00] but they have we've been told, and again, I encourage you to go back and listen to the, to the podcast, um, that we did, the service seems to be recognizing the fact that they lost. And so they're refunding these penalties and interest until the appeal. So Number one, they could appeal it and win. And maybe they never process your claim or you have to give the money back. They do nothing. I think my sense is they're just letting the clock run out. They're not, you know, don't expect [00:23:30] any IRS guidance because they don't agree with it. So they're not going to encourage people. So I'm, I'm kind of thinking the IRS is kind of letting this lag. And hopefully.

Annie Schwab: Hopefully nobody knows about it.

Roger Harris: Nobody knows about it.

Annie Schwab: And here we are talking about it on a podcast.

Roger Harris: So we're trying to make you. So. But again, and one piece of advice because, you know, so a lot of people say, well, how am I going to know if my client got charged late filing penalties and interest? And if so, how much? Well, it's possible if you calculated [00:24:00] it in preparing the return, you might have that information in your tax software. And depending on what your tax software's capabilities are, you might can do some data mining. Or maybe you just have to go look. The other thing I would suggest is if your clients have another reason to have an online account is go into their online account and pull transcripts. That would should show.

Annie Schwab: Period.

Roger Harris: That if they were charged those penalties and interest. And if there are again, you've got to decide how much you're going to charge and what's [00:24:30] the threshold by which it makes business sense for you. Here's one thing, though, that I think we have to guard against, and another reason we keep telling you this. Let's say you have a client that got $5,000 worth of penalties and interest, and you don't think you can do that for enough money to make it worth your while, but you don't tell them and somebody else tells them on July the 11th, they could have gotten that $5,000 back. They're [00:25:00] not going to be happy. You don't have to do the claim. But I do think you probably have an obligation, if you know about it, to at least tell your clients and somebody will tell them to call Frost. Frost will do it. You know, I don't know how much they'll charge. But, you know, again, I think I don't think we can just ignore this and say.

Annie Schwab: I think it needs to be communicated.

Roger Harris: And yeah.

Annie Schwab: With some kind of parameters like, well, you can go in your online account, you can, you know, go back in and view records. Maybe [00:25:30] you got a notice from the IRS assessing these things. You know, have you received an IRS notice during this time frame? Um, do you know, just a little bit of work and then say, hey, you call me, let's talk about it. You know, this would be my fee doesn't work for you. Maybe they want to give it a shot themselves. I mean, it's, it is a two page form. It's not like, you know, a huge installment agreement kind of thing. It's it's a pretty simple form. There are some tips, like we said, wet signature, no e-filing. Each claim on the. 843 make sure [00:26:00] you mention the Kwan case. Another tip would be if you're doing the calculation estimate. Hi. So let's just say you put $600 on there and you're due 500. Well, the IRS is going to send you 500. What would be worse if you put 400 and you were due 500? The IRS is going to send you 400, right?

Roger Harris: So send you more than you asked for. That might send you less, but they're not going to send you more. They're not going to go in and say, well, Annie, you made a mistake. You really should get 500.

Annie Schwab: You're not going to go recalculate it and track all the things. They're going [00:26:30] to get this form and they're going to hope July 10th gets here sooner than later.

Roger Harris: Yeah. So and again, they could appeal it. They might win. So your clients need to understand that this is the way the court has ruled. I mean really. I mean I'm not a lawyer, thank God. Um, but, you know, in looking at the reasoning behind it, it seems fairly.

Annie Schwab: I thought it was reasonable.

Roger Harris: Yeah. I mean, I mean, again, you can read the IRS position and but I mean, I don't know how you can say if that's the law that [00:27:00] the disaster has to be declared over before the due date can be established. And that didn't happen until 2023. You know, but anyhow, there is the possibility that they will appeal and win and they don't get their money. But again, I'd rather have my claim sitting there and maybe they just don't process any of them until the appeal, you know, is heard. But if you don't make the July 10th deadline, it ain't going to matter.

Annie Schwab: Well, and Frost has submitted some of these and and they're [00:27:30] getting money. So they're, they might be moving slow, but they are actually doing something as it relates to these 843.

Roger Harris: I think that and again, I'm really getting, you know, to use your ski analogy ahead of my skis here, I'm trying to use, I think, the legal term that they said. I think they said that the IRS is acquiescing to the ruling while appealing it, meaning so if you push it and a claim gets processed, they have to recognize that as of right now, they lost, but they reserved the right and to appeal. I [00:28:00] just I don't know if it's a case worth appealing. I think they'll probably decide it on January. Excuse me, July the 11th. How many of these people actually file for a claim And is it worth wasting our time to go appeal it because nobody else can do it and it's over. Um.

Annie Schwab: So let me repeat the time frame because I know it's kind of strange. So it's just every, any business or individual that was charged penalties or interest between January 20th of 2020 [00:28:30] and July 10th of 2020 3rd May be eligible and eligible. And that's payroll income tax, corporate tax, air, sea, all of these, all of these types of returns. Um, and then you file the 843 paper file, wet signature reference the case. Um, what else am I missing. Make sure you estimate high if you're not sure. Um we we here at Padgett we're, we're encouraging [00:29:00] our offices to send some client communications, some, some client forward facing kind of explaining what this is and asking, you know, reach out to us if there's something that you would like to discuss or you think you may qualify. Our particular software has a data mining feature. So we could and that would be for income tax only. But we could go data mine for clients who return showed large penalties and interest during that time frame. So you might be able to do something like that. And then like Roger said, another option [00:29:30] would be the online accounts to see what kind of transcripts you had pending notices during that time or any kind of communication, you know, from, from the IRS.

Roger Harris: So but communicating clients because they may know they paid it and you don't because they may have gotten a notice. They thought, well, yeah, I was late, so I owe it. So they just paid it. They never bothered to tell you because they didn't figure there was any reason to because in their mind they owed it. So, so communicating to clients, you know, may bring up some people [00:30:00] who have paid this, that you aren't even aware of again, because of its far reaching because it's payroll, it's IRC, it's income, it's corporate. You know, there's no perfect place other than maybe the transcripts to go to, to see that. Yeah. So but again, I'm just concerned that if we ignore it and say, oh, who cares? Uh, there could be a lot of money that a client is due or able to retrieve that you didn't give them an opportunity to go do it. And I don't know what [00:30:30] your engagement letter says. You know, maybe you've got legal protection because of the way your engagement letter is written. I don't yeah, but still, I mean, let's be good stewards of our clients. And what is it called? I mean, send them a notice, you know, let them know.

Roger Harris: I mean, I think, you know, if I knew somebody was going to do it, I'd, I'd offer them, you know, the service at a, at a fee that I thought fairly compensated me not just for, you know, I'm going to give you a little other tip here. It doesn't take [00:31:00] a long time to fill out an. 843 that's not what you're getting paid for. What you're getting paid for is the fact that you know that that 843 has to be filed and why it has to be filed and what the deadline is. So the value of that service is much greater than some sort of calculation based on it's an 843. And my software says an 843 is $75 or whatever stupid number it is, or it only took me 20 minutes. It's not the 20 minutes that matters, it's the fact that you knew it. You reached [00:31:30] out to the client and you got the client. So it's value pricing. And if you don't know what that means, we'll probably find a webinar for you on that. But this is a great example of where you need to price for value, not for time or by form.

Annie Schwab: Yeah, absolutely.

Roger Harris: Is that enough? Sorry. What's the W. Don't again, the KONG is a whole different case. Don't worry about that one, I don't think. But no, you get the.

Annie Schwab: W and go back to the podcast because I, I, I agree with you. The Frost folks were very, very knowledgeable, very [00:32:00] helpful, very clear. Um, explained it very well. I would go back to that podcast. If you're, if you're sitting here going, this is a lot to grasp in 1 in 1 thing here. Um, go, go back and.

Roger Harris: Yeah, I'm out here jogging on the beach with my earbuds in and I can't remember all this. So go back to the podcast and listen to them. You can listen to this one. I think I'll pat ourselves on the back. I thought we did a pretty good job in 5 or 10 minutes of summarizing it. But, but go back and listen to that because those are the experts and they spent a whole [00:32:30] hour just basically on this.

Annie Schwab: Yeah. Okay. What's next?

Roger Harris: Where next? Where do we go next?

Annie Schwab: We let's see. Well, everybody was probably working with their heads down. Um, there were a few minor updates as it relates to Oba. Um, we've got something out issued on April 10th actually, um related to the no tax on tips. Um, if you recall, when this first came out, there was a comment period. The IRS actually said they received over 300 comments related to [00:33:00] this. Um, those. And there was a public hearing and they took those into consideration and sort of updated, made the final regulations, um, where the occupations were identified as qualifying for no tax on tips. And what they did was they expanded several categories. I don't know how many extra categories, but things like visual artists were added, floral designers were added. Um, there was a gas pump attendant added. [00:33:30] Um, so there are minor changes. I mean, it's worthy of just noting, um, especially if you get like sort of a, I'm not sure that that was part of, you know, that's a category that I remember seeing. Just take, just take a look at it. Um, there was also in the final rule, there was also the, um, sort of a slight explanation about voluntary, um, versus automatic gratuity. And so the IRS still maintains its position that, you know, an automatic gratuity [00:34:00] does not comply with the statutory requirements. It's not voluntary. So if you go somewhere and it's an automatic gratuity, that's not part of it. However, they did explain that if the customer voluntarily provides an amount exceeding the automatic gratuity. So you tip on top of the tip. Um, that would be considered a qualified tip. And to me that makes I mean, that makes sense. Um, some of these, you know, automatic gratuities are 25%. And so how often do people [00:34:30] generally tip above that? I don't know, in fine dining restaurants that you probably do see that, um, they also have the option to reduce the tip amount to zero. So, you know, if somebody scratches out the automatic gratuity and says, I'm not paying that. Um, clearly that's not going to be a tip either.

Roger Harris: Yeah. It's funny, I think a lot of times people that tip extra didn't realize that 20% was added. I know in a lot of restaurants.

Annie Schwab: I've done that before.

Roger Harris: Oh, we all have. Where you don't realize until you get home. And look at the receipt [00:35:00] that they'd already added 20% and you added.

Annie Schwab: Another.

Roger Harris: Another 20% on top of it. So at least the, the, your waiter or waitress benefited from that extra 20%. There's still scenarios, you know, that I'm sure are confusing that we'll never get answers to. Like again. They made it very clear, you know, for it to be voluntary, you have to have the ability to make it zero, you know? Right. So, so if I sit at a table and it's 20% and I can make that 20% zero, and then I add anything [00:35:30] to it, does that make it a qualified tip? Because I have the right now, I think really they would probably add the 20 back to my bill. So do I really have the right to make it zero? Or do I just make myself feel good and think I'm doing something? And then they come back and say, Mr. Harris, you're paying the 20%, right?

Annie Schwab: Good try.

Roger Harris: Yeah. Nice try. But you know, and, and so, um, But they did clarify at least the fact that if they add 20 and you want to give them an extra 25 bucks [00:36:00] and you put that on there, then it's.

Annie Schwab: Qualified.

Roger Harris: That qualifies, which does you absolutely no good. But it does your waiter or waitress some good. Sure, sure. So that's kind of like slipping them a $20 bill in cash, right? It's kind of the same thing that we've all probably been known to do. I used to tell people they'd give me the credit card thing, and I'd write it down and say, this is for your tip share. And then I'd hand them 20 and say, this is for you.

Annie Schwab: Yeah.

Roger Harris: That was a good old days. [00:36:30] You know, where people didn't report tips anyhow. So I don't know. I don't know how much they're saving with this, but they did clarify that I don't. Was there anything else on the ob A that they.

Annie Schwab: Um well we, we, I thought the stats for the Trump accounts. Um I, I thought those I didn't expect there's over 4 million kids who have established the Trump accounts by filing that, uh, form 4547 again new this year. A lot of softwares were, you know, prompting the questions depending on how old or [00:37:00] the year that your children were, were born. Um, I did find it interesting. Um, the Dell family, I think was the first family that contributed over $6 billion towards, you know, uh, kind of underprivileged children. And there's like all of these AGI limitations. And so, um, there's, there's this 50 state challenge going on where, uh, the Department of Treasury is actually promoting this challenge to encourage other wealthy individuals to kind of copycat the Dell commitment. Um, [00:37:30] and have, and see if every, you know, all of the 50 states can get someone to contribute. Um, that being said, I, I, we, when the tax season started, at least for our folks, there was a little kind of hang up, the form wasn't quite ready for filing and it required, um, like a signature on it. And, and it was a little kind of confusing on how, you know, could it be an e-signature versus not? I think by the couple of weeks in everything sort of settled down. Um, and so over 4 [00:38:00] million kids, I mean, I don't know, other stats related to, you know, whether that was what they estimated or it was above or below. But for me, I thought that was a pretty high number.

Roger Harris: Yeah. I'll actually, I mean, I guess I'm trying to sit here and think of why wouldn't everybody that, that had an eligible child take the $3,000. I'm trying to think is there.

Annie Schwab: Well, it's mainly because you didn't know about it right. So I to me, unless you're going to a tax professional or [00:38:30] you have a software that, you know, preempts the question, it was one of these things that sort of like took a back burner, in my opinion, took a back burner to no tax on tips, no tax on overtime, the Social Security deduction, the car loan interest. And so I just, I felt like it wasn't top of mind to a lot of taxpayers, especially those that were filing right when tax season started. You know, looking for those refunds kind of thing. Um, and I don't know if you can go back and amend a return to get it. Um, I actually, I never went and looked to see if that's something that you [00:39:00] can go retroactively do if you, if you missed it. But I just felt like it just wasn't the hot topic of the season when we were going into it. Um, and I may be wrong. Um, but yeah.

Roger Harris: Well, I'll get into some stats, but you reminded me of something there when you said, um, didn't know about it. If you, uh, didn't go to your tax preparer, um, there was a New York Times article that was actually written on April the 15th. Um, and it referenced a study. Now [00:39:30] I've found the New York Times article. I haven't found the study yet. And they ask because refund and I'm going to get into some information that's got some numbers in it, but refunds were more this year. They were higher, you know, for most as expected. Yeah, that was expected. So the study went to the taxpayers and said who is responsible for your refund being higher? And I think if I asked that question to a room full [00:40:00] of people, what do you think would be the most common answer to that question? If you ask a room of 100 taxpayers, who do you think is responsible for the fact that your refund went up? If you did any kind of following of the news, you would probably either say, the Republicans or President Trump. You might say the Democrats. I'm not sure how you get there, but you probably would say the Democrats or President Trump. You know what the survey said? [00:40:30]

Annie Schwab: I know the answer, so I can't. I got the answer wrong.

Roger Harris: So the answer is they gave us credit for it. They gave the tax preparers credit for it. So the people who are getting these extra refunds to your point, think they got it because they went to a tax preparer who was knowledgeable and got it for them. They don't give any credit to the people who passed the law that we actually helped implement. So it's interesting. So my takeaway from that is if you're going to get the credit for [00:41:00] it, get paid for it. Yeah, exactly. So good point. So there you go. Um, let me tell you what I did on April 15th. Um, well, you guys were killing yourself and this shows what a geek I am about certain things. Um, you know, we don't really have a commissioner. We, you know, Danny Wuerffel was the last real commissioner. And for a while, Scott Bassett, the Treasury secretary, was acting commissioner. But you can only be acting [00:41:30] commissioner for so long. So that time passed. So he had to step aside. So what we have now is a CEO, Frank, and I hope I pronounce his name correctly. Big Estano is the CEO. So he's kind of like acting like the commissioner, but he doesn't care the title.

Roger Harris: But anyhow, on April the 15th, and this is kind of a tradition in Washington, they hold hearings. Uh, and so they bring him in, you know, for a hearing on April the [00:42:00] 15th and all these hearings. I mean, if you're a geek like me, if it's going to usually be the Senate Finance Committee of the House Ways Committee, Ways and Means Committee, there are all those hearings are available online to watch. So that's it. Being the geek I am, I said, well, let me go watch this on April 15th. And it was entertaining and depressing at the same time. Uh, uh, the politics that are in this kind of thing is just [00:42:30] really, really. I'm kind of just tired of it. I mean, the questions that you got asked, he got asked by the Republicans versus the Democrats were completely opposite. Obviously, you know, the one beautiful bill was the greatest thing ever done if the Republicans were talking about it. If the Democrats talked about it, it was the worst piece of legislation ever. And it's breaking the company and it's all for the wealthy. And of course, his response to a lot of these things was also based on he was appointed by the [00:43:00] Trump administration.

Roger Harris: So he got a little more testy with the Democrats than he did with the Republicans. Yeah. So but through all of that were some interesting numbers that, uh, and we've alluded to some of them, but I thought it'd be interesting to kind of share. Now this is, I will say this, and I don't know that he's wrong. The service from the standpoint of how did the filing season goes? Thought it went pretty well. And some of these numbers they used to to back it up, but it's based primarily [00:43:30] on how many returns they processed, who claimed what deductions, how fast did refunds get administered? Uh, because the average American taxpayer probably doesn't wait on the phone if you call. They never call the IRS. So things that we may experience, you know, we may not come to the same conclusion, but I thought I'd share with you some of the, um, the numbers that he put out at that hearing. Um, the first number is at 53 million Americans had already [00:44:00] benefited from those new OBB deductions. So tips over time, whatever the senior deduction, 30 million people had claimed it, with the average deduction being $7,500. So, you know, $6,000 a person. So the average was 78.

Annie Schwab: And all that.

Roger Harris: Kind of stuff. Right. Um, this is similar to what you said, but I think it's a little update. As of January [00:44:30] 1st, there were 5 million people who had opened Trump accounts. Okay, so another million people. Um, The average tax cut for filers benefiting from this bill was $800. So you got $800, which reminds me of one chart that was shown there. I don't think they used 800, but they used something. And this is this is where politics keep kick into these hearings is there was a chart one of the Democratic senators [00:45:00] put up that acknowledged, let's use 800 just because it doesn't really matter. That acknowledged that they got $800 back, but then they listed everything else that costs more gas, eggs, this and that. That added up to more than 800 and said, see, they didn't really get a benefit. Well, first of all, the IRS has nothing to do with tax policy or policy, right? They're administrators. So everything that that was up there and he couldn't comment on it. I mean, he could probably say that's a stupid question, but he didn't do that. But anyhow, so [00:45:30] so there you go. 6 million people claim the tip deduction. And the average deduction there was were 7100. Okay. The biggest one. And this kind of surprised me because it was the hardest one for most of us to figure out the overtime deduction.

Roger Harris: They had 25 million people claim that. And the average amount of the overtime deduction was 3100. Okay. And car loan interest was the smallest. [00:46:00] Uh, but it was an $1,800 average deduction. It was just about a million. And the other thing that most people got, because it was automatic, we didn't have to really ask questions. The standard deduction of the child tax credit, of course, both were both highly, uh, increased. So, you know, it was interesting, again, it was interesting to hear the, the numbers and to see what they were. It's just frustrating that we can't have a tax policy discussion without it becoming so Partizan that it's really [00:46:30] not a discussion. It's it's one side of the aisle saying how wonderful it is, the other side of the aisle saying how bad it is and the IRS is stuck in the middle. I did find one thing that's interesting. Now, the other thing you need to know is that the budget time in Washington. And so the Trump administration has put out their budget and the House is putting out their budget, all of which cut the IRS more. Both both of them do. From 1 billion to 1 billion plus.

Annie Schwab: Jeez.

Roger Harris: So, uh, [00:47:00] and they take it directly from enforcement. And yet people in that hearing, senators were advocating for better enforcement.

Annie Schwab: Yeah, something's not allowing the tax gap.

Roger Harris: And yet they give them less money. Now what the way they get around that is everybody focuses as if the only tax gap exists with the people at the top of the food chain, the top 1%, that somehow if we audited all of them, the tax [00:47:30] gap would go away. And I think we all know that's not true, that we need more. We need enough enforcement so everybody complies with their tax obligation, not just the 1%. So on one hand, we're saying go after these folks, but you got to do it with less money and it's acting like nobody else doesn't pay all their taxes. I forgot the number. It was. It's a scary number of how much the tax gap is. I don't think I. And there [00:48:00] was an acknowledgment. And you see this. There was a Wall Street Journal article today, I think it was today. It may have been yesterday, acknowledging that people are beginning to believe they can cut corners with the IRS and not comply.

Annie Schwab: Yep.

Roger Harris: And I think that's true.

Annie Schwab: Oh, I think so too. I mean, I heard it this tax season. It's not like I'm going to get audited. It's not like they're going to figure it out. It's not like somebody's going to, you know send me a notice. I'm like they're still going to send notices. They're still going to audit the numbers. [00:48:30] Probably Not as many as in the past, but I do think that that is a consensus around. Yeah. You know, they're running out of money. They fired all these people. We have a government shutdown and fair, fair assumptions. I mean, those definitely impact. Um, but I don't know.

Roger Harris: There has to be a risk averse. Yeah. There has to be some enforcement out there. I mean, I'm assuming everybody that's listening to this podcast believes that while it's a voluntary tax [00:49:00] system, we all have an obligation to try to do it the right way and to try to pay the tax that we owe. We don't owe one penny more than we owe, but we owe whatever it is we owe. But we also know there are people who say, I only owe. What I have to get, what I can get away with paying. You know, that's and it's going to be hard for us in our industry to continue to do what we think is right. If half the people in the country can go somewhere and get the tax return done based on how they want [00:49:30] it to turn out, not how it's supposed to turn out. And that's happening because there's not enough enforcement. So we need enough enforcement. And I've said this for years. We need enough enforcement. So doing it right still matters.

Annie Schwab: Right.

Roger Harris: I don't know what that is. I'm not smart enough to know what that is. But I do know that that's not the feeling out there right now, is that you have to do it right. And if we're going to try to make people do it right, and our listeners are going to try to make it do it right, that needs to matter.

Annie Schwab: Yeah, I agree with you. I agree with you. [00:50:00]

Roger Harris: Yeah.

Annie Schwab: Well, see, I mean, that's these are only the numbers up until, you know, a couple of days ago, we've still got, you know, a lot more processing, a lot more returns to take into account. And I'm sure that we'll get some, some updated numbers and then some maybe final, you know, filing season numbers.

Roger Harris: I think the, the order in which people claim that they won't change overtime will still be number one, but the average refunds.

Annie Schwab: The totals.

Roger Harris: Yeah, average refunds totals will change. Because just think about how many returns he was testifying on the 15th, so that information [00:50:30] at best came through the 14th. I mean, that's at best. I don't know how quickly they can create these numbers, but so yeah, they're going to change dramatically. And then we've got a hole all the way till October before everybody files. So it's an interesting hearing. And again, if you're if you're tax geek like me and you want to go watch those hearings, they can be entertaining for you kind of get tired of it after a while because you kind of kind of predict what the next person's going to say.

Annie Schwab: Who's going to argue what and. [00:51:00]

Roger Harris: Which party is this? All right, this is what they're going to say. And yeah, you know, it's.

Annie Schwab: It's kind of cool that you can go see it live though.

Roger Harris: Yeah, it's, it's, it's neat. And sometimes it's really good. And there's when there's multiple witnesses who come with different opinions to kind of hear them argued out, but you knew this was going because you had nothing but a, the CEO of the IRS, I keep wanting to say the commissioner and the politicians. So it was a pretty down party line hearing, having testified before Congress when it. They're not going to come near [00:51:30] as hard on somebody like me as they would on him.

Annie Schwab: Of course not.

Roger Harris: They may disagree with me as much, but at least they're kind to the common folk. Yeah.

Annie Schwab: Well, this is great. No, this is this is great. I think we covered a lot of information. Um, hopefully our listeners got a lot out of it. Um, but our next podcast is going to be interesting. I'll say that.

Roger Harris: Yeah. Well, we're going to be live on the road.

Annie Schwab: Yeah. We will.

Roger Harris: Be, we'll be, yeah, we'll be live. But you won't hear it live.

Annie Schwab: Right, right. [00:52:00]

Roger Harris: That'll be fun.

Annie Schwab: We'll, we'll surprise you when it's, when it comes out. But um, we'll be, we'll be on the hill. So we'll see what we bring.

Roger Harris: We'll be, we'll be right in the. I don't know what's the right word. We'll be in Washington, D.C. so that's, is that right in the middle of the battle or the craziness or whatever you want to call it?

Annie Schwab: I don't know, but I'm, I'm, I'm, I'm, I'm looking forward to it.

Roger Harris: Yeah. We have a really interesting guest. Interesting guest to join us.

Annie Schwab: So yeah.

Roger Harris: Yeah.

Annie Schwab: Mark your that's all I [00:52:30] have for today. Roger. I hope everyone's doing something fun. Um, and always we will continue to bring you the latest news, latest updates. Um, and thanks again for all of our listeners.

Roger Harris: Yeah. Andy, thank you for all you do and thank you and congratulations on you getting through tax, you and your team getting through another tax season. And, uh, we'll see you in DC in a couple of weeks.

Annie Schwab: Sounds good. Thanks.

Roger Harris: All right. Thanks everybody for listening. Hope you enjoyed this podcast. Tell a friend if you, [00:53:00] uh, like it, send us some ideas if you got some ideas and, and, um, we'll be back in a couple of weeks with another federal tax update podcast from Washington, DC.