Neil Fishman, returning president of the National Conference of CPA Practitioners, shares the issues his members are paying attention to as they head into tax season — and what they’re keeping an eye on for the rest of the year, too.

Transcription:

Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Dan Hood (00:04):
Welcome to On the Air with Accounting Today; I’m editor-in-chief Dan Hood. Tax season has just started and as always, it’s a bit of a nerve wracking mystery. Trying to figure out how it’s going to turn out here to help us look ahead at that is Neil Fishman. He’s returning for the second non-consecutive term as president of the National Conference of CPA Practitioners, which counts tens of thousands of small firms across the country among its members, and it always keeps its pulse on a finger on the pulse of what’s going on with tax issues throughout the year, but particularly when it comes to tax season. Neil, thanks for joining us.

Neil Fishman (00:32):
Thank you very much for having me, Dan. It’s great to be back.

Dan Hood (00:35):
As I said, tax season has just started. We’re actually recording this a little bit before tax season, but we’ll go ahead and say the tax season is started by the time you listen to this. So I’m curious, what are your overall expectations for tax season? How hard is it going to be?

Neil Fishman (00:48):
Oh, I think it’s going to be as brutal if not more, and it has been in past years. Well, several reasons. First of all. One is the people who do this are a year older. Sometimes they say as we get older, we float. It takes a little longer to get some things done, but in all kidding aside, there are still a few things up in the air. As we start this tax season Now, the IRS starting to process corporate returns as of January 15th, January 27th, they’ll start processing personal returns and of course the people who got their information in early and now they’re waiting for their refunds, they’ll be there. But for everybody else, we still have the waiting game. How long is it going to take for the brokerage houses? That’s really the big concern to get the information to our client so they can get it to us.

(01:53):
That’s always the case because sometimes it seems to take longer and longer. Now, as you know, years ago, everything had to be out in the mail by the end of January. At some point the brokerage houses complained that it wasn’t enough time for them, so government gave them till mid-February. But of course, even with that, and I’ve seen this, I’ve had clients come to me in March and they’re bringing me their information at the beginning of March and instead of the consolidated statement from the brokerage house, they have a letter saying, basically, we know we were supposed to have it to you by February 15th. We need more time. We’ll have it to you by March 15th. And even with that, and even though they do get it out from March 15th, the one primary reason they asked for them four more time was that they would not have to give out corrected statements. They’re still doing it. They’re still giving. They’re still giving out. Corrective statements may not be as many, but they’re still coming out.

Dan Hood (03:06):
Right. As you say, this is a perennial problem. Right. There doesn’t seem to be any consequences for them for not delivering the information when they’re supposed to.

Neil Fishman (03:15):
Well, I will, in their defense. I will say they’re trying to do it, but unfortunately sometimes, and I cannot comment as you what’s going on internally there as to why they have to make it, have the delay or even again, send out the correct statement. But that is the first ll that’s a concern. Then of course there is the uncertainty, and we’ll talk more about this later, is what’s going to happen after this year legislatively, regarding taxes, we would like, obviously if Congress is going to do something and we will discuss that. I know you have a question on that. Obviously you would like them to do something earlier rather than later.

Dan Hood (04:04):
Right. Well, that is going to be the big issue for 2025 is what and when do they do about all the different tax legislation from Tax Cut and Jobs Act, that’s sunsetting starting next year, as well as some other, some other issues.

Neil Fishman (04:19):
Well, actually sunset setting this year at the end of this year?

Dan Hood (04:23):
Yes.

Neil Fishman (04:23):
4 23.

Dan Hood (04:24):
Yeah.

Neil Fishman (04:24):
Right. The Tax and Jobs Act, the provision is regarding personal returns. Those is scheduled to that though. Let’s just say pro argument sake, Congress does nothing. So here are a few of the basic things that happened. The tax brackets, which were reduced one to 4% seven years ago, they go back up one to 4%. The standard deduction, which was as I call it, super side, goes back to normal. The exemptions, which were eliminated, come back the cap on salt state and local taxes of 10,000, well, that cap will be gone. And the miscellaneous itemized deductions, which include tax prep fees, investment advisory fees, unreimbursed employee expenses, safe deposit box, and a few other things, those all come back. And of course, casualty losses will no longer be limited to being in a declared federal disaster area. All that will revert back. That’s if Congress does nothing.

(05:31):
Question is what is Congress going to do and when are they going to do it? Unfortunately or fortunately, depending on your perspective, result of the election or the house is 2 22 15 Republican, but we already know that there are two vacancies in Florida First District and believe it’s the sixth district. The first district person resigned, and the sixth district, well first didn’t take his seat in the new Congress and the person from the sixth district is becoming a national security advisor. So now the two twenties down to two 18, now throw in another member of Congress from New York has been nominated to be our ambassador to the un. So once she is confirmed, now you’re down to two. She resigned down to two 17, at least for the first few months because in Florida they’ve already announced special election for those two seats, April 1st, New York State, they have to have the election within 90 days of the vacancy. So now you’re down. So now the two 20 is down to two 17. There is very little margin for error, if any.

Dan Hood (06:55):
Right. Well, it’s interesting when that happens, right? The obvious thing is that your options for tax legislation perhaps get narrowed down to what are the things that everybody can agree on or that both sides of the aisle can sort of say, yeah, we’re okay with that. Are there any of those, as you said, all the things that are sunsetting, are there any of those issues that you can look at and say, well, yeah, what everybody agrees we ought to fix this or everybody agrees we can ignore this?

Neil Fishman (07:22):
Well, one thing that I think a lot of people already agree on is the limit on salt. Remember with cap to $10,000, and that hurts a lot of people, especially in states where there are high taxes, whether it is income tax or property taxes. I mean, they’re even part of Florida where people are paying in excess of $10,000 in property taxes, but they can only take a that then assuming they can’t itemize. If you may recall that last year around this time, little bit, or in February, actually, there were several members of Congress from New York Republicans who wanted to get the salt cap raise from 10 to $20,000 did not go anywhere. Assuming that they extend the tax cuts and job debt, which is what I think is eventually going to happen. The one major change I do see happening is that raise in the cap on sold. It might just be the 20,000. It could go higher, but I think 20,000 is probably a safe bet. Unfortunately, I only have half a crystal ball, so it doesn’t work as well as a whole one.

Dan Hood (08:38):
Right, exactly. Well, that’s for 20 year task for 2025 is to get that crystal ball repaired. But it is, as you say, it’s super complicated and it’s tough to figure out the math on that. We know, for instance, that a lot of representatives had gone to visit President Trump to talk specifically part about the salt cap. So it does seem as there might be progress on that, but all the other ones, as you say, up in the air for the rest of the year, it does give us a whole year to be anxious about that, to worry about what that will mean for next tax season. But maybe we can just come back for a second and talk about this tax season, the one that started January 27th. Are there any big regulatory or legislation related issues that you’re telling your members to keep an eye out for over the next two, three months?

Neil Fishman (09:28):
Well, the one thing that I am concerned about right now, and it was just announced today, is that they have put a hiring freeze at the IRS.

(09:38):
Now, the inflation reduction Act, when it was passed a couple of years ago, gave the IRS 80 billion over a decade. The majority of that money or more than have what’s be used for enforcement in hiring people, especially because you have a lot of people at the IRS who are retiring eligible, and that’s what they’re doing. They’re retiring and with them a wealth of knowledge, especially if they’re in examinations doing audit, that knowledge goes away with them. So their IS has to hire people and they have to be trained, and sometimes they don’t have the knowledge on how to deal with a certain type of profession or industry. And we as a preparer representing our clients, we and our clients, we have to sometimes explain how this business works, how if you’re an insurance agent, how an independent agent get their income, their commissions, and so forth. So that’s always a concern, and with not only that, the IRS wants to modernize, they need to modernize. The government says they want to spend less money. Well, if you want to have fewer people working, then you have to have more modern systems,

Dan Hood (11:11):
Right?

Neil Fishman (11:12):
And sometimes they do not make the connection between the two,

Dan Hood (11:18):
Right? Yeah, this is right. The more money you spend on the IRS, the easier it is to get the revenue you need to do the other things you want to do. But it does, as you say, raise questions about IRS performance in the coming tax season, right? In its ability to be responsive to not just tax preparers, but for our audience, more importantly, sorry, not just taxpayers for our audience, we’re more concerned about how they deal with tax preparers because there had been, my impression was that there had been some encouraging signs over the past year or so, or say since the inflation reduction came out and brought that extra funding that the IRS had been improving in a number of areas in terms of responsiveness, not necessarily as great as we’d like it to be, but they’d been improving.

Neil Fishman (12:07):
They have been improving. But now unfortunately, the Congress has called some of that money back and it would not surprise me if the new Congress called more of it back. And so where does that leave? And so, not that I’m defending the IRS, but where does that leave the IRS? I mean, if you’re calling the IRS, how long are you going to be waiting on the phone? And if there’s a hiring freeze and it can’t even hire temporary help to help during, for say during this part of the year, then people, whether it’s the taxpayer or the practitioners calling, we’re waiting even longer to speak to somebody of the IRS. And if you’re sending correspondence, how much longer are it going to take for the IRS to get back with the respond?

Dan Hood (13:03):
Yeah, it certainly is a major question. And one, obviously at the point, given that we’re right on the cusp of moving from one administration to another, moving from one set of priorities for the IRS to another, we can’t really, it’s difficult to predict at this point though, as you say, we know that there is an appetite for reducing the scope and scale and money sent to the IRS, so we’ll have to see how that plays out over tax season. We’ll keep our fingers crossed that it doesn’t have too much of an impact on IRS responsiveness and as you say, the time it takes them to open mail or answer phone calls, et cetera, et cetera, or the level of information that they’re able to share. There’s a lot more we can talk about in terms of this tax season, but I want to talk a little bit more about some of the legislation that’s going over the course of the year. We talked a little bit about it, but I want to dive into that a little bit more. But first, we’re going to take a quick break. Alright, and we’re back and we’re talking with Neil Fishman, the President of Nic Pap, the National Conference of CPA practitioners talking about tax season. We talked a little bit about some of the expectations, what’s going to happen there. And we had talked also about potential tax legislation over the course of 2025. There’s a lot of provisions from the Tax Cuts and Jobs Act that are sunsetting and some concern around those. Are there other areas of legislations that you’re keeping an eye on as we look out across the year?

Neil Fishman (14:27):
Well, there is one state, well, as you know from past, one thing that’s near and dear to me is what’s called the Taxpayer Protection and Prepare Proficiency Act. If you recall, about a decade or so ago, the IRS attempted to regulate preparers on their own, culminating in the case of loving the IRS, which basically said the IRS over their authority at the time of the ruling and the subsequent appeal, which the Iris lost the then Commissioner John Koskinen said, we’re going to wait for Congress to grant the authority. So since then, in the last few congresses, there has been this bill, the Tax Payer Protection Prepare Proficiency Act, which would give the Treasury Department therefore the IRS, the authority to regulate preparers. Now, the IRS, you know, if you’re a paid preparer, you have to have the P 10. The IRS keeps track of all the P two that they issue, and as of January 2nd, they come out with this report every month they were, hold on, find, oh, here we go. Since the PTEN program began about 30 years ago, they have issued over 2.1 million PS as of January 2nd, current P tens are just over 667,000.

(15:53):
Okay? Now, they do give something of a breakdown of professional credentials with this that they let attorneys APAs enrolled actuaries enrolled agents and enrolled retirement plan agents. The greatest number is obviously certified public accountants at this current level 170 1005 89. That is less than 26% of the P tens that are issued. Now, if you throw in the attorneys and the enrolled agents, that’s another 78,000. However, that number is misleading because the IRS does not differentiate between credentials. So some CPAs are enrolled agents, some gps are attorneys, some GPS could be all free. They’re counted. If they are in one of those categories, they’re counted in each category. So I think it is safe to say that two thirds, at least two thirds may be as much as 70% of the preparers are not credentialed. Now, if you’re not credentialed, and I’m not attacking the non-credentialed for that fact, but if they’re non-credentialed, there’s no oversight for those people.

(17:17):
If you’re a CPA, an attorney or an enrolled agent, there is somebody that oversees the work that you do and somebody wants to file a complaint. They can. If you’re an attorney, it’s the state bar. If you’re an enrolled agent, it’s the IRS. If you’re a CPA, it’s whoever in your state oversees CPAs. For example, New York State is the Department of Education in Florida. It is the board of counseling. There’s somebody who can file a complaint with. If you’re not credentialed, there’s nobody. Now, we all who have credentials or not, we all get somebody who comes to us this year and is gone next year for whatever reason, but we also have, but have people who come to us. I’ve seen this myself because it’s happened and I’m sure it happens to everybody else. Somebody new comes, they bring last year’s return, we review it.

(18:14):
Then inevitably, I have to sometimes ask the question, Dan, did you prepare your tax return yourself last year? Your answer is going to be no. Why are you asking me that? And so I point out the signature block where it’s either blank or self prepared. Now with the IRS flag that return for examination, their position is going to be that you did it yourself. Therefore, you are going to be held to the same standard as a paid preparer. And you have to remember at the initial level of a audit and examination, it’s not American juris produce of innocent until prove guilty. You have to defend what you did from the beginning. Depending on how far you go, there comes a point where the burden of proof ships to the Internal Revenue Service, but most cases don’t get that far. So that, Mike, that is my personal concern. I worry about that not just for me, but for the future.

Dan Hood (19:20):
It makes sense, right? I mean, as you say, everyone who’s listening to this who’s prepared tax returns, has seen one of those returns come in and worse, right? They’ve often seen tax returns that are just a mess that come in. Even if they were signed, they may have been signed, but they were still prepared by someone who wasn’t qualified or didn’t have the expertise of A CBA or an EA or a tax attorney.

Neil Fishman (19:40):
So some level of, remember when the IRS was doing this originally, remember, what do they want the people to have? You have to have, if you’re not credentialed, you have to do so many hours of continuing education, which is far less than what I have to do. I have to do basically 40 a year for my respect, CPA licenses. And for those people, since they’re not credentialed, they had to take a one time as a minimum competency exam. Minimum, not maximum minimum. So who

Dan Hood (20:17):
Knows? And I think it was something like 15 hours of CP or cce. So it wasn’t a huge amount, but yeah, it was, as you say, a bare minimum all around.

Neil Fishman (20:26):
Yes.

Dan Hood (20:28):
But here’s the question, and I know this, I know you pay particular attention to this. We’ve talked about it in the past, and to my mind, it makes a fair amount of sense. I think the question is, do we expect in this environment that anyone’s going to give the IRS more authority to regulate anybody?

Neil Fishman (20:45):
Well, that’s always the question. But then the people who have said that the IRS is doing things beyond their scope, beyond what they’re supposed to be doing and will refer to the Affordable Care Act, making sure people had health insurance. This is right up, I think this is right up the IRS’s alley because sure, it’s making sure that everybody is paying what they’re supposed to be paying there. As a former client of mine said, now deceased paying their fair share of taxes. Everybody wants government services, but nobody want. But it seems like most people do not want to pay for them.

Dan Hood (21:30):
Well, I mean, if I can get things without paying for ’em, that’s always my preferred form. We’ve talked about this before and it is an important issue and when we hope can get taken up. So we’ll keep an eye on that. But I want to talk particularly what’s going on at Nic Pepp, what’s new with you guys. As I said, lots and lots of members serving lots and lots and lots and lots of particularly small business clients. So I want to talk a little bit about what’s going on at NIC P. But before we do, are there any other issues beyond tax or that you’re keeping an eye on or that you’re suggesting your members keep an eye on?

Neil Fishman (22:06):
Well, there is one other one that we are very interested in. Well, there are actually a couple of items. The first one is dealing with bonus pay, because basically with bonuses, people, well, people are not having enough withheld. If they’re getting a bonus, the very low, your bonus could be a million dollars, but they may only still be withholding about 20%. And last year when we were in Washington, we proposed that, let’s raise, no, depending on the amount of the bonus, let’s raise the amount of at least federal taxes held. One thing that I’ve seen, especially last year, is that a lot of people are under withheld.

(22:51):
They don’t have enough withheld. A second issue is regarding, actually it’s casualty losses, but it’s actually more regarding theft losses, because right now they’re lumped together, casualty and theft losses. They’re treated the same way. But unfortunately under current law, you have to be in a declared federal disaster area to claim a casualty loss. And if you have a theft law, and actually this happened to a client of one of my colleagues last year, the year before she got scammed out of money from her retirement accounts. Well, she can’t claim a casualty loss because first fault she wasn’t in a disaster area. And because it was retirement money, the money came out of the account. She got a 10 99 R, that money was all taxable.

Dan Hood (23:45):
Yeah. Oh, that’s

Neil Fishman (23:47):
Brutal. Yeah. So something that we’re also trying to do is maybe be about getting theft losses separated from casualty losses. So this way, if it’s a theft loss, at least you can try to recoup some of the money by not having to pay the tax on the amount you got scammed

Dan Hood (24:06):
From. Excellent. That’s a worthy goal. Excellent hope, wish you success and push you forward on that. That is something that definitely makes a lot of sense to change. We’re running a little low on time here, but I do want to, as I said, talk a little about what’s going on at Nick Pap. Any new developments?

Neil Fishman (24:25):
Nothing new at this time. We are still trying to keep getting our name out there, just like all the fewer people are coming into the profession. We would like to find a way to help them see the opportunities there. Most of the people, and not just talking Nick that, but most of the people who do tax preparation work are getting older and they’re looking for exit strategies. And the people, the students who are still in school going for accounting, you would like to think a lot of them want to do the higher end work. They want to do audits, they want to do forensics, and that’s fine, but you still have to be grounded in the basics. And tax work is the basics. I knew a person long, he was an attorney, did a lot of tax work. Whenever he hired somebody, it would make them do a couple of tax returns by hand so they could understand the flow. Because remember the two pages of the 10 40, that’s shut the summary. It’s all the other forms, the schedule A, the schedule B, the schedule C, the Schedule D, the 62 51, the 82 83, the 82 80 file. All the ferries forms, everything goes from those forms to other forms summarizing in the 10 40. And so we in Nick Pap, we’re looking for ways to get out and reach out to the college students to say, there’s opportunity here for you.

Dan Hood (26:03):
Right. Well, and you are in a particularly good position to speak to the opportunities for people who maybe don’t want to, for whom going and working for a giant big four corporation, big four firm or a large accounting firm, may not be what they want. Maybe they want to strike out on their own or work with someone a little smaller, get a little more local, a little more. And you guys are in a fantastic position to promote that.

Neil Fishman (26:24):
Well also remember, unfortunately with the larger firms, if they don’t, every couple of years, if they don’t see you moving up, they move you out. And then you have to make a decision as to what that person wants to do.

Dan Hood (26:42):
And I say tons of opportunities at small firms, either as to join them or to help with an exit strategy. I think for a lot of people, that may be an attractive option to suggest that, Hey, maybe I can move into the profession this way, as you say, as opposed to through an upper out experience.

Neil Fishman (27:03):
There will always be a need for someone like me, always.

Dan Hood (27:07):
Excellent, excellent. That’s an encouraging thought. Alright, with that, as I say, we’re just about out of time, but Neil Fishman of the National Conference of CPA practitioners, and I should say a practitioner in your own right, Fishman and Associates. So you’re in the trenches. It’s not like you’re just preaching from on high. This is your daily life. So again, we appreciate you joining us and sharing all this information with us.

Neil Fishman (27:31):
Thank you very much for having me, Dan. I’ll talk to you soon.

Dan Hood (27:35):
Great. And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Kelly Malone, y. Rate. To review us on your favorite podcast platform and see the rest of our content on accounting today.com. Thanks again to our guests and thank you for listening.