Ms. Hull was interviewed for this article by North Bay Business Journal - Article Source
STEVEN E.F. BROWN, FOR THE NORTH BAY BUSINESS JOURNAL
The dust hasn’t completely settled from the new tax laws passed nearly a year ago, but as the IRS completes the final, written forms of many of the new regulations, local accountants are starting to get a sense of the big and small changes they need to clarify for their clients.
And their services are needed now more than ever, as an Oct. 15 filing deadline approaches and businesses scramble to make sense of new rules.
“The running joke is that the new tax laws are extending the CPA full-employment act,” said Tamara Hull of Delahunty Jannisse & Hull Certified Public Accountants in Novato.
Hull has been around long enough to have seen many changes, both in tax laws and in technology used to meet deadlines like the Oct. 15 one, less famous than the filing date in April but in some ways more serious.
“To me the only thing worse than April is that it’s the final deadline,” Hull said. “With April 15, we can still file an extension.”
Jon Dal Poggetto, managing partner of Dal Poggetto & Co. LLP in Santa Rosa, agreed that the inability to file an extension makes Oct. 15 worse than the infamous April deadline. And because the run up to October brings Northern California’s golden Indian summer, he says he’d rather be outside.
“The weather is usually better, which makes working long hours even more difficult,” he said.
Hull still remembers the pre-electronic dark ages of tax filing. Technology has made some things faster and easier.
“I remember, pre-fax machines, having to wait for a courier to deliver a K-1.” Hull said, describing a form many of her clients need to get from business partners before filing their own taxes. “Later we waited by the fax machine for that K-1 to arrive. Email improved that process even more.”
But for Hull, the steady improvements in technology haven’t necessarily been the biggest changes.
“I no longer need to know which post office in the Bay Area will stay open late and postmark envelopes until 11:59 p.m.,” she said, adding parenthetically that it was an office near San Francisco International Airport, commonly called by its aviation industry code, SFO.
Changes in various filing deadlines have really made the Oct. 15 experience easier, she said.
“The Oct. 15 deadline has gotten a lot better in recent years because the IRS has changed the due dates (initial and extended) for the entities that issue K-1s and grantor letters to earlier dates. It used to be that Oct. 15 was the final extended due date for S corporations, partnerships, LLCs, trusts and individuals,” she said.
That late deadline for required forms from business partners often meant a last-minute scramble to get everything together and drive to that particular SFO-area post office. But new, earlier deadlines have made that easier.
“But now S corporations, partnerships and LLCs are due Sept. 15, so we have a whole month to obtain the K-1s. Trusts are now due Sept. 30, in part because many of them await K-1s from partnerships and maybe S corporations and LLCs,” Hull said.
Renee Mengali, president of Mengali Accountancy Inc. in Healdsburg, also bemoaned the chaos of waiting for K-1s and other required forms to arrive.
“The Oct. 15 deadline typically involves the more complex returns because these clients have been waiting on multiple K-1s from various sources in order to complete their tax return,” said Mengali. “They typically involve multi-state complexities, passive loss considerations, and net investment income tax complexities also.”
Hull, Dal Poggetto and Mengali all keep a sense of humor about their stressful work, particularly at this time of year.
Dal Poggetto keeps a cartoon showing an accountant at a job interview listing his qualifications, saying, “I started at the bottom driving a getaway car.”
Hull also has a cartoon in her office — it shows a couple meeting with their accountant, who tells them, “The good news is you saved $2,530 with the marriage tax deduction, the bad news is it cost you $2,525 for me to figure it out for you.”
Mengali’s favorite bit of humor is a Christmas joke: “How does Santa’s accountant value his sleigh? Net present value.”
Reducing client stress is a big part of the job, and the 2017 tax law changes have created a lot of anxiety among business owners.
Section 199A of the new code, which covers deductions for qualified business income, has generated the most questions for Hull.
“We are getting most questions about the new Section 199A deduction and if it applies to them. The interpretations of the Section 199A deduction are all over the map, with various camps disagreeing about how it should be claimed,” she said.
Mengali echoed this.
“In August we finally got draft regulations clarifying the types of businesses that would and would not qualify for this very significant deduction, but a lot of questions still remain and the regulations are still only ‘proposed,’ which means they are subject to change,” Mengali said. “This makes giving guidance to clients in the ‘gray area’ quite challenging and tax planning not as easy as it could be.”
California’s burgeoning marijuana industry may be cramped by some of the changes, too, said Hull, who advises some clients in that business.
“We are talking a lot about the new — and, in our opinion, expensive — regulations for California cannabis businesses and how they are likely to push good cannabis businesses out of the business,” she said. “That would be a very sad outcome. Our cannabis clients are asking us to help them set up better accounting procedures and how to improve their record-keeping so that they are ready in case the Bureau of Cannabis Control does a surprise audit.”
Overall, Hull said, although the Tax Cuts and Jobs Act of 2017 was ostensibly meant to simplify taxes, it doesn’t seem to have made things all that much simpler.
“We are also talking about the ‘Trump’ tax laws and how they don’t really seem to have simplified taxes for many people. The limitation on the state income tax deduction is affecting a lot of our clients,” she said.
And her accountant’s sense of humor helps her accept some of the inevitable IRS absurdity, such as a simplification that isn’t really simple.
“The new ‘simplified’ Form 1040 just makes us chuckle,” she said. “Sure, that Form 1040 is shorter, but now you have to complete a bunch of new schedules.”