Stressed by tax compliance? Here’s a cure.
Feeling stressed, tax pros?
I'm not surprised. Consider:
- We're facing an annual tax gap of at least $450 billion. That's the different between what Americans owe and what they voluntarily pay in taxes each year.
- Voluntary tax compliance has hovered between 83 and 84 percent each year for the past 27 years.
- The IRS and Congress want to raise that voluntary compliance rate to 90 percent.
- Each 1 percent increase in the voluntary compliance rate is equal to $27 billion in revenue.
Get the picture? The IRS is turning the screws on taxpayers in an effort to increase compliance. That, of course, means more work for you.
In a eye-opening session at the AICPA's 2012 Tech+ Conference / Practitioners Symposium, New River Innovation co-founder Jim Buttonow said the volume of IRS notices jumped seven-fold from 2001 to 2009.
And it's not just a federal issue, Buttonow said. Given the revenue and budgetary challenges they face, state and local governments may wind up adopting tax compliance strategies that look terribly similar to the IRS's.
All of this has had a profound impact on CPA firms. Tax preparation volume hasn't increased much at typical firms, but Buttonow says post-filing compliance services have jumped by 75 percent. With all of that extra time spent on compliance issues, Buttonow says firms are less profitable and are finding it harder to retain clients.
This mess does present a few opportunties. New River Innovation Product Manager Brian Howell says forward-thinking firms are focusing on six best compliance practices:
- Educate your clients. Tell them what's coming post-filing and how you can help.
- Be proactive. Get copied on compliance notices and be a "safety net" for clients.
- Institute a real-time compliance deadline in your firm. Build in redundancies.
- Pool your knowledge. Codify useful practice-and-procedure knowledge and store it digitally.
- Leverage your staff. Push compliance work to those with lower billing rates and focus on strategic priorities.
- Remember your ethical and regulatory compliance standards. Make sure your staff is competent in these areas and implement a review process.
The bottom line, say Buttonow and Howell? Turn the compliance challenge into an opportunity. Understand the effects that tax compliance issues are having on your practice and use them to become a best-in-practice firm.
What did Buttonw and Howell miss? How are you addressing tax compliance overload?