Thanks to increased funding from Congress, the IRS is finally evolving from a mere tax collector into a technology-driven agency for CPAs and other tax professionals.
In a recent episode of the Federal Tax Updates podcase, hosts Roger Harris, EA, and Annie Schwab, CPA, explain how mastering this digital shift can help you better serve your clients and gain a competitive edge in the market.
One way the IRS is improving the experience for tax payers and tax professionals is online accounts. These accounts are changing how we interact with the tax system.
The Power of Online Accounts
For taxpayers, online accounts provide a one-stop shop for managing their tax affairs. Annie Schwab, CPA and Franchisee Operations Manager at Padgett, explains: “Once established, it’s a really great tool for clients to access their records.”
These accounts allow users to:
- View current and prior year records
- Access transcripts
- Make payments and set up payment plans
- Respond to IRS notices electronically
- Verify the legitimacy of IRS communications
- Update mailing addresses
Tax professionals aren’t left out of this digital revolution. While still in development, professional accounts are already proving their worth. “You can do things like submit and withdraw power of attorneys and tax information authorizations,” Annie notes. The future looks even brighter, with hopes for expanded access to client information and streamlined communication with the IRS.
Streamlining Processes and Enhancing Value
Consider this scenario: A client comes to you in a panic, having misplaced their previous year’s tax return. Or they went to a scam preparer and are unsure whether they filed an extension. In the past, this meant hours on the phone with the IRS.
Now, with online accounts, you can help the client create or log into their online account right in your office to quickly access this information, verify any outstanding issues, and even resolve simple discrepancies without a single phone call.
This real-time access to information empowers CPAs to provide more proactive and timely advice. As tax expert Roger points out, “Sometimes, knowing something now lets you do something right away. But if you find out about it in March, it’s too late.”
Navigating the Digital Landscape Securely
As the IRS embraces digital transformation, understanding how to interact securely becomes crucial. Annie emphasizes a critical point: “The IRS initiates contact through the mail. They do not email you. They do not text you. They do not contact you through social media. Occasionally, the IRS will call or come to your home or place of business, but that’s probably something like several years of delinquent returns or employment tax-related deposits.”
With an online account, you can check the online account to verify it’s legit. They also provide a secure way to respond to legitimate notices quickly.
It’s Never Too Early to Start Year-End Planning
The digital transformation of tax administration isn’t just about streamlining processes—it’s about reimagining the role of tax professionals. Tax pros can position themselves as indispensable strategic advisors by leveraging these new tools for proactive, year-round tax planning.
Key areas for ongoing planning include:
- Reviewing withholdings and making adjustments
- Addressing life changes (marriages, divorces, retirement, buying or selling a home, or having children)
- Evaluating contributions to accounts like HSAs or dependent care accounts
- Handling state tax issues when switching jobs over state lines
- Discussing business investments or expansion plans
Summer is a great time to proactively contact clients and analyze their current tax situation and cash flow to provide timely, data-driven advice.
“A lot of that can lead to additional accounting work, payroll work, and tax planning,” Annie says.
Embracing the Future
The future of tax administration is undoubtedly digital, and the most successful tax professionals will embrace this change and stay ahead through continuous learning and adaptation.
To equip yourself for success in this new era:
- Set up your own IRS online account to familiarize yourself with the system
- Encourage clients to create online accounts, offering assistance if needed
- Stay informed about new digital tools and features as they become available
- Look for new ways to leverage online accounts in your tax and advisory services
By taking advantage of the IRS’s digital transformation, tax professionals can streamline processes, reduce fraud errors, and provide more timely and accurate advice to clients to help them navigate tax compliance. Doing so will solidify your position as an indispensable partner in your client’s financial success.
To learn more, listen to the latest Federal Tax Updates podcast episode.