The IRS is in the process of both beefing up and automating more of its auditing functions in hopes of closing the tax gap and bringing in more revenue — but that could help tax practitioners bring in more revenue, too, Jim Buttonow, cofounder and vice president of product at New River Innovation, told attendees at the annual American Institute of CPAs’ Practitioners Symposium, held here.
“The IRS is moving to more of a real-time system,” Buttonow explained, utilizing new technology and automated systems to get more efficient. It has discovered that field audits aren’t as cost-effective as automated forms — and so it’s sending out a lot more of them, with the volume of IRS notices increasing nearly sevenfold since 2001.
“Ninety-five percent of your interaction with IRS will be some kind of automated systems,” Buttonow predicted. “Similar things are happening at state and local level. States are going to get a lot more efficient here. It’s not just a federal issue — it’s a state issue, and as states get more efficient, they’re going to look a lot like the IRS.”
Given the ease and efficiency of automated notices, you can “expect more federal and state post-filing compliance activity,” he said.
With more and more your clients likely to receive notices from clients, “You can turn this into a practice strength,” Buttonow said.
While many firms and tax practitioners have been reluctant to get into post-filing work — often leaving it to their clients to handle on their own — Buttonow strongly recommends that they start exploring it. Post-filing work offers a year-round opportunity for engagements and profits, and lets you use expensive resources like trained staff and equipment outside of tax season.
It’s also a growing business, Buttonow noted: “Tax preparation volume and activity hasn’t increased much, but post-filing compliance services have increased 75 percent.”
Finally, he warned that not helping clients handle audits and IRS notices can be dangerous for your practice, as clients who feel you weren’t there for them when they had post-filing issues think about looking elsewhere for filing services. “In this area, there is a significant opportunity to lose your client,” he said.
Las Vegas (June 14, 2012)
By Daniel Hood