The Tax Reform Bill, also referred to as the Tax Cuts and Jobs Act, was passed on December 22, 2017. This tax revamp is the first of its kind in over three decades and has considerably reformed both individual and corporate income taxes. There’s no question that the new law transforms the work performed by accountants, but should the tax bill be viewed as an opportunity or a threat to the accounting profession? Keep reading to weigh the pros and cons for yourself.
Simplified Individual Tax Preparation
Changes like limiting itemized deductions, increasing the standard deduction, eliminating personal exemptions, and increasing the thresholds for alternative minimum tax (AMT), significantly simplified the preparation for individual returns.
Pro: Since these changes make individual tax returns less complicated to complete, tax preparers can seize the opportunity to migrate from billing by the hour to flat rate billing providing the same amount of money in less time. A decreased volume in preparation of individual tax returns also allows the opportunity to prepare more complicated individual and business tax returns. The higher the difficulty level, the higher the billable hours and rates.
Con: A less complicated return reduces the earning potential for tax preparers. Taxpayers may prefer to DIY their returns versus hiring a professional. For those who still hire a tax preparer, less billable hours are available due to less complicated returns.
More Opportunities For Tax Planning and Advisory Services
New elements to the tax law, like the Qualified Business Income Deduction (QBI), provides the opportunity for more tax planning and advisory services for pass-through entities (partnership, S-Corp, LLC, and sole proprietorship). This complex deduction is available only to certain types of businesses and has income and wage limitations. As more information about this new deduction becomes available, clients will need guidance on how to implement this new potential tax saving strategy.
Pro: Tax planning and advisory services are considered to a value-added benefit to the client which presents the opportunity to charge more for this service in comparison to tax preparation services. For those who enjoy interacting more with their clients, these duties require more client facing interaction leading to deeper connections and community.
Con: Tax planning and advisory services may be new to some tax preparers, thereby presenting a learning curve. Learning how to provide these services will not only take time away from servicing clients but will likely result in a financial investment to acquire the appropriate software and training to provide these services.
Increased Value For the CPA Designation
The tax bill has surprisingly made tax preparers very popular. Accountants are no longer seen just as number crunchers but are now seen as educators for this new tax code. If you are a CPA, then get ready for lots of tax related questions as soon as others discover your title.
Pro: If you do specialize in tax, then you can position yourself as an expert on the new bill. You will have an increase in opportunities for tax clients as a business owner or more job opportunities in a tax role as an employee.
Con: If you do not specialize in tax or are not yet well-versed in the new tax code, then prepare yourself for some disappointed reactions and potentially the lost opportunity for a new client.
The new tax bill presents many opportunities and threats for the accounting profession. After weighing the pros and cons for yourself, how does the tax bill affect your career as an accountant? Let us know in the comment section!