In the world of tax professionals, there’s a saying: “It’s not a matter of if, but when.” This adage, once reserved for IRS audits, now applies to a far more pressing challenge: the digital transformation of tax practice.
As a CPA or EA, you’re likely aware that the Internal Revenue Service is rapidly modernizing its systems. But are you prepared for the seismic shift this brings to your practice?
A recent Federal Tax Updates podcast episode, featuring industry experts Roger Harris and Annie Schwab, offers a roadmap for navigating this new terrain.
Embracing the Digital Shift: It’s Now or Never
“Don’t fight this much longer,” Harris advises, referring to the increasing digitalization of tax services. “You might as well go ahead and work in this online arena with the IRS because this is just going to continue to go from here.”
Embracing technological advancements is no longer optional—it’s essential for survival and growth in modern tax practice. But what does this digital embrace look like in practice?
Reimagining Your Pricing Strategy
For many forward-thinking firms, the digital shift starts with a reimagining of their pricing strategy. The podcast revealed a surprising trend: a majority of surveyed office owners have successfully increased their prices, many by over 6% and some by more than 12%, without experiencing significant client loss.
Why? Because technology is enabling tax professionals to offer more value than ever before. “I think taxpayers think of their preparers as advisors,” notes Annie Schwab. “Bundle pricing or subscription pricing seems to be on the increase.”
The Bottom Line: Consider moving towards value-based pricing models. By leveraging advanced software and digital platforms, you can provide real-time financial insights, proactive tax planning, and integrated business advisory services—justifying higher fees and cementing your role as an indispensable business partner.
Leveraging IRS Online Accounts: Your New Secret Weapon
At the heart of this technological transformation is the IRS online account system. For your clients, these accounts offer easy access to tax records, transcripts, and payment options. But for you, they’re a game-changer.
Imagine this scenario: A small business client comes to you in a panic, having received an IRS notice about discrepancies in their past returns. In the past, this might have meant hours on the phone with the IRS. Now, with an online account, you can retrieve the necessary information in minutes, quickly identify the source of the discrepancy, and provide informed advice on the spot.
The Bottom Line: If you haven’t already, set up your professional IRS online account and encourage your clients to do the same. This tool can dramatically streamline your operations and minimize errors, positioning you as a more effective advisor.
Navigating the Choppy Waters: Current Challenges
Of course, no transformation is without its challenges. The episode highlighted ongoing issues with Employee Retention Credit (ERC) claims and mail delays affecting tax payments.
Regarding ERC claims, Annie Schwab noted, “The moratorium is still in place, so the IRS is barely opening envelopes.” This backlog is causing concerns about the statute of limitations potentially running out, which could affect the IRS’s ability to pursue fraudulent claims.
Mail delays are creating another set of headaches. Roger Harris shared a striking example of checks being processed out of order, leading to misapplied payments and confusion for taxpayers and the IRS.
The Bottom Line: These challenges underscore the need to stay informed about rapidly changing regulations and IRS procedures. They also highlight the growing importance of electronic payments and digital communication with the IRS. Advise your clients accordingly.
Your Summer Game Plan: Strategic Tech Planning
So, how can you navigate this digital landscape effectively? The experts emphasized the importance of strategic planning, particularly during the slower summer months.
“If you’re going to make any changes to your tech stack, better to do it in the summer than try to do it, certainly than during a tax season,” Harris pointed out. “But give yourself a learning curve.”
Use the summer months to:
- Evaluate and potentially change your technology and software
- Analyze your firm’s performance
- Plan your continuing education strategies
Speaking of education, don’t miss out on the IRS Nationwide Tax Forums. They offer up to 18-20 hours of CPE credit for less than $300 and provide valuable insights into the latest technological advancements.
Looking Ahead: Preparing for Future Developments
The podcast also touched on several future developments you should have on your radar:
- The IRS Direct File Program
- Potential legislative changes affecting credits like the R&D credit and ERC
- New FTC rules on non-compete clauses and changes to federal overtime rules
The Bottom Line: Stay informed about these changes and prepare for them. Regularly review IRS announcements, attend continuing education events, and be ready to adapt your practice as new tools and regulations emerge.
Your Digital Transformation Starts Now
The future belongs to those who can harness technology to elevate their services from mere number-crunching to strategic business advisory.
By embracing tools like IRS online accounts, strategically evaluating your tech stack, and continuously educating yourself on technological advancements, you can transform your practice from a traditional tax preparation service into a powerhouse of efficiency and insight.
Ready to dive deeper? Listen to the full Federal Tax Updates podcast episode.