Tax Preparers Likely to Be Big Winners in Overhaul
Beverly Hills travel agent Annette Love has always done her own taxes. But no more--thanks to the income tax bill approved by a House-Senate conference committee Saturday.
“It’s totally confusing. I don’t even know what’s going on,” Love said. “Definitely, next year I’m going to an accountant.”
The massive overhaul of the nation’s tax code could mean a boost in business for the nation’s tax preparers as befuddled filers chuck pencil, paper and pocket calculator and seek professional help.
Although the bill will simplify tax calculations for some taxpayers and will drop an estimated 6 million low-income people off the tax rolls completely, the confusion created for nearly everyone else will probably translate into new customers, most tax preparers say. Their only complaint: the prospect of days of seminars and hours of extra reading to figure out the changes.
“At the start of it, they talked about simplifying the tax system, but they stopped using the word simplify,” said Jerry Walsh, a spokesman for the American Institute of Certified Public Accountants. “It may be tax reform, but simplified it isn’t.”
“It’s all gotten so complicated, you can’t keep it in your head anymore,” Los Angeles accountant Kirsten Almaas Loumeau said. “It basically means you have to spend more time reading, but your clients appreciate you more.”
The Internal Revenue Service reports that paid preparers figured the taxes on 45% of the 95 million returns for 1985 that have been counted so far, up from 41% in 1984. Because there are no federal regulations on who may prepare taxes, those returns could have been signed by accountants, lawyers or anyone else who calls himself a tax preparer.
By nearly all accounts, tax preparers will have even more to do when the 1987 tax season rolls around in early 1988.
“I can’t imagine that this bill is bad for tax preparers,” said Stephen Corrick, tax partner in the Washington office of federal tax service of the Arthur Andersen & Co. accounting firm. In fact, many report they are already receiving calls from worried clients who are interested in tax-planning help this year.
“I have been inundated with calls on ‘what it means to me,’ ” said Michael Sedgwick, an accountant in Santa Monica. “Everybody is a little apprehensive about how it’s going to affect them,” he said, adding that about half of his clients face higher taxes under the tax revision.
Firm Expects Busy Time
Stuart Kessler of Goldstein, Golub, Kessler & Co., a New York accounting firm, said that his firm will have the busiest tax-planning period in its history between now and the end of the year.
“The upside is it’s great for business. The downside is we’ll be entering the tax season in late September instead of early February,” Kessler said.
Some business could be lost because taxpayers who do not itemize their deductions may realize that they can easily figure their own taxes, said Tom Bloch, president of the tax operations division of H&R; Block in Kansas City, Mo. “But, for some people, it will become possibly more difficult to prepare a tax return,” he said.
‘Lot of Confusion’
“I expect that there will be a lot of confusion, a lot of concerns, and a lot of people will be looking for tax-preparation help,” Bloch said. Through its nearly 9,000 company-owned and franchised offices worldwide, H&R; Block prepared almost 11 million 1985 tax returns.
Gale Case, a partner in the West Los Angeles firm of Alper & Case CPAs, said he thinks that his business will remain about the same.
“I don’t think there are going to be very many people who will look at (the tax form) and say, ‘I can do it now,’ ” he said. “We’re not too concerned about losing our source of income.”
But, on the other hand, “I don’t know that it will produce a lot more people making use of tax preparers,” Case said.
No matter what happens to individual tax bills under the new code, clients will have one unpleasant surprise waiting for them at the tax preparer’s office. Tax preparation fees, which once were fully deductible in the miscellaneous deductions section of the tax form, probably will not be deductible for most taxpayers under the new code.
Limit on Deductions
The bill says that miscellaneous deductions--such things as tax preparation fees and union dues--may be deducted only to the extent that they exceed 2% of adjusted gross income.
Many tax preparers do not think that will dissuade clients, but it could tend to hold down fee increases.
“I don’t think it will make a big difference,” Bloch said. “I don’t think people base their decisions on getting tax preparation help on the basis that it’s deductible.”
Chatsworth accountant Steven Duben called the fee deductibility “the frosting on the cake” that few of his clients will miss.
But Sedgwick, the Santa Monica accountant, said the loss of the deduction has “got to make people think twice, although I think a lot of fees will be finessed.”
Said Case: “There’s a great deal of concern among CPAs I associate with that there’s going to be a chilling effect on fees.”
Because of changes in the law, tax preparers say they expect to spend several days in seminars and much of their free time reading to become familiar with the code.
‘That’s Our Job’
“The law is always changing and new ideas are coming into play,” said Los Angeles accountant Gilbert Vasquez. That always means more study for accountants, “but that’s our job,” he said.
“You finally get to the point where you understand what last year’s law was, and they change the whole thing,” Duben said. “It’s a fairly hefty out-of-pocket expense to get up to date on these things, not to mention the hours on nights and weekends when you’d rather be doing something else.”
Despite the pressures, New York accountant Kessler took a rare break Tuesday.
“If I go to the opera or a ball game, I take my tax stuff with me,” he said. “Today is my 30th anniversary, and I promised my wife I wouldn’t take it to the show I’m taking her to tonight.”
