Navigating the Ever-Changing Tax Landscape

Tax laws are becoming increasingly complex with each passing year. The Tax Cuts and Jobs Act of 2017 (TCJA), the Inflation Reduction Act of 2022 (IRA), and other general tax updates are making it increasingly challenging to stay up to date with all the changes. Unfortunately, the shortage of CPA professionals is exacerbating the issue. Firms are struggling to find people to handle the day-to-day tasks, let alone keep up with the ever-changing tax landscape. With that in mind, it’s crucial to reflect on how these changes have impacted and challenged many CPA firms in recent years.

Over the last few years, one of the major challenges faced by tax professionals has been keeping up with the expiration of tax provisions. In 2017, the Tax Cuts and Jobs Act (TCJA) was passed as part of a legislative process called reconciliation, which mandated that the law would be revenue-neutral after ten years. To achieve this goal, several revenue raisers were added to the bill starting in 2022.

These included changes such as the amortization requirement for Section 174, the reduction of bonus depreciation, and modifications to the rules governing Section 163(j). As a result, CPAs found themselves in the difficult position of having to explain these provisions to their clients, which can be quite a challenge, especially when it comes to issues like the 174 amortization. Although 174 was added to the law in 2017, few people anticipated that it would become a reality. This has left many CPAs and the IRS struggling to understand the rules governing Section 174, with guidelines only being released in September 2023.

While CPAs worked to interpret changes to tax law from the TCJA, the Inflation Reduction Act of 2022 was released, adding or revamping hundreds of tax credits and deductions. Clients immediately expected their providers to understand the intricacies of tax credits related to manufacturing (45X), investment tax credits for solar (48), and changes to tax credits for vehicle charging (30C), raising the question: how can CPAs and taxpayers keep up with all these changes?

CPA firms and taxpayers often seek help from specialists to interpret changes in tax rules. However, it is important to ensure that these specialists are accurately interpreting the new rules and prioritizing their clients’ best interests. To do this, CPA firms may need to work with providers who have a deep understanding of the rules and are committed to their clients’ best interests. Unfortunately, taxpayers may sometimes receive advice on tax credits from providers with ulterior motives. A notable example of this in recent years has been the emergence of ERTC shops that push credits on taxpayers who may not qualify for them.

Collaborating with providers who have a deep understanding of the intricacies of the latest tax regulations can help the CPA firm in ensuring their clients receive the best possible service, while simultaneously enabling the firm to benefit from the expertise of specialists during a time when the labor market is particularly challenging.