by Taxing Subjects | Jul 1, 2025 | Tax Tips and News
6 Practical Tips for Managing Difficult Tax Clients
Tax season can bring out the best—and worst—in your clientele. Stress, deadlines, and complex financial issues may cause some tax customers to act impatient, defensive, or outright combative. As a professional tax preparer, knowing how to handle difficult clients is essential for maintaining professionalism, protecting your time, and delivering accurate returns.
Here are six actionable tips for client management for tax preparers when dealing with difficult tax clients.
Set Clear Expectations Early
Before you prepare a single form, make sure your clients understand the scope of your services, timelines, required documents, and associated costs. Provide an onboarding packet or checklist that outlines what they need to bring. This reduces confusion and gives you a reference point if disputes arise.
Pro tip: Share Drake Software’s Client Tax Document Checklist to get clients organized early.
Use Calm, Assertive Communication
Difficult conversations are best handled with a calm tone and steady posture. When tensions rise, try not to match the client’s energy. Instead, use clear, direct language and reframe issues around solutions rather than blame.
Pro tip: Acknowledge the client’s position and present action items. For example, “I understand this is frustrating. Let’s look at what we can do next to resolve it.”
Don’t Skip Documentation
In any case where there’s a dispute or pattern of hostility, make sure you’re documenting conversations and decisions. Keep copies of email threads, engagement letters, and notes from phone calls. If needed, this can help protect you from liability or justify your decisions to the IRS.
Create Boundaries Around Availability
Managing clients during tax season requires time-blocking and structure. Let your clients know your office hours and how to reach you for urgent versus non-urgent needs. Establish boundaries for same-day turnaround and weekend availability — you can even include these details in your voicemail or email signature during peak season.
Empathize, But Stay Professional
Sometimes, tax clients are difficult because they’re anxious about refunds, audits, or unfiled returns. Acknowledge their emotions without taking on their stress. Keep the conversation focused on facts, not feelings.
Pro tip: For example, you could say, “It’s completely normal to feel overwhelmed. We’ll work through this step by step.”
Know When to Say Goodbye
If a client is consistently disrespectful, refuses to follow your advice, or becomes a liability, it may be time to disengage. You have the right to protect your practice and your peace of mind.
Use a disengagement letter to formally end the relationship, outline what work (if any) will be completed, and document how sensitive information will be disposed of on your end.
Ready to Reduce Stress with Your Clients?
Improve your workflow by downloading our Client Checklist to help your tax customers be prepared and reduce friction during intake.
– Article provided by Taxing Subjects.
by Taxing Subjects | Jun 2, 2025 | Tax Tips and News
After a few years of delays, the reporting threshold for third party settlement organizations (TPSOs) reported on a Form 1099-K has officially dropped in 2025. This significant change, which is not the only one affecting Forms 1099-K this year, could affect various kinds of tax situations in ways your clients might not expect.
What is the function of a Form 1099-K?
A Payment Settlement Entity (PSE) must file Form 1099-K annually to report payments made through payment card or third-party network transactions. A PSE:
- Includes merchant acquiring entities (like banks) that process credit/debit card payments.
- Includes TPSOs like payment apps that handle transactions between buyers and sellers.
- Does not include healthcare networks, in-house accounts payable departments, and automated clearinghouses.
A payment card includes credit, debit, or stored-value cards (e.g., gift cards), provided through an established card network. Anyone who receives payments via a payment card or from a TPSO is considered a participating payee.
While it is a reporting form, Form 1099-K does not specify how or whether the reported amounts should be taxed. It simply reports payment activity.
What are the new lowered reporting thresholds for Form 1099-K in 2025?
The IRS has implemented phased reductions in the reporting thresholds for TPSOs, which include payment apps and online marketplaces:
- 2024: TPSOs must report payments exceeding $5,000.
- 2025: The threshold decreases to $2,500.
- 2026 and beyond: A further reduction to $600.
This gradual decrease means more taxpayers will receive Form 1099-K.
What is the scope of Form 1099-K?
In addition to the threshold change, the scope of Form 1099-K has also expanded. The form is issued by payment settlement entities to report:
- Payments made via credit, debit, or stored-value cards.
- Payments settled through third-party networks exceeding the specified thresholds.
It’s essential to note that Form 1099-K reports gross payment amounts without accounting for adjustments such as fees, refunds, or discounts.
What is the impact on gig workers and online sellers?
Individuals engaged in gig work or online sales should be particularly vigilant. Even if income falls below the reporting threshold, all earnings must be reported on tax returns. The lowered thresholds aim to capture a broader range of income, emphasizing the importance of accurate record-keeping.
Are personal transactions subject to reporting requirements?
The IRS distinguishes between business transactions and personal payments. For instance, money received from friends or family as a personal gift or reimbursement is not subject to Form 1099-K reporting. However, payments received for goods or services sold are reportable and taxable.
Let Drake Software make your final push the easiest part of tax season.
Still looking for tax preparation software? It’s not too late to make the switch. Watch Drake Tax in action with a free trial or contact our Sales team for more information.
Note: For detailed information on Form 1099-K and its requirements, refer to the IRS guidelines.
– Article provided by Taxing Subjects.
by Taxing Subjects | Apr 16, 2025 | Tax Tips and News
In 2025, several significant natural disasters have impacted various regions across the United States. In response, the IRS has announced tax relief measures to support affected individuals and businesses. This article outlines the disasters and the corresponding tax relief provisions.
California Wildfires and Straight-Line Winds
Incident Period: January 7, 2025 – January 31, 2025
Affected Area: Los Angeles County, California
IRS Relief Measures:
- Extended Tax Relief for Southern California Wildfire Victims: Affected taxpayers have until October 15, 2025, to file federal individual and business tax returns and make tax payments. This extension applies to deadlines falling between January 7, 2025, and October 15, 2025 for those impacted by.
- Penalties Abatement: Penalties for payroll and excise tax deposits due between January 7 and January 22, 2025, are abated if the deposits were made by January 22, 2025.
Kentucky Severe Storms, Flooding, and Landslides
Incident Period: February 14, 2025, and continuing
Affected Area: Entire state of Kentucky
IRS Relief Measures:
- Extended Deadlines: Affected taxpayers have until November 3, 2025, to file federal individual and business tax returns and make tax payments. This extension applies to deadlines falling between February 14, 2025, and November 3, 2025.
- Penalties Abatement: Penalties for payroll and excise tax deposits due between February 14 and March 1, 2025, are abated if the deposits were made by March 1, 2025.
Hurricane Helene
Incident Period: September 1, 2024, and continuing
Affected Areas: Parts of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, and Tennessee
IRS Relief Measures:
- Extended Deadlines: Affected taxpayers have until May 1, 2025, to file federal individual and business tax returns and make tax payments. This extension applies to deadlines falling between September 1, 2024, and May 1, 2025.
- Penalties Abatement: Penalties for payroll and excise tax deposits due between September 1 and September 15, 2024, are abated if the deposits were made by September 15, 2024.
General Guidance for Affected Taxpayers
Automatic Application of Relief: The IRS automatically applies filing and payment relief to taxpayers with an IRS address of record in the disaster area. Those who moved to the area after filing their last return or whose records are located in the affected area should contact the IRS at 866-562-5227.
Claiming Disaster-Related Losses: Uninsured or unreimbursed disaster-related losses can be claimed on either the tax return for the year the loss occurred or the prior year. To claim these losses, file Form 4684, Casualties and Thefts, and attach it to your individual tax return (Form 1040). If claiming the loss for a prior year, file an amended return using Form 1040-X and include Form 4684. Remember to write the appropriate FEMA disaster declaration number on the forms (e.g., 4856-DR for the California wildfires).
Staying informed about disaster relief options is crucial for effective recovery. Tax professionals and preparers should monitor updates to assist clients in navigating these relief measures.
For further updates, please subscribe to Taxing Subjects.
Resources:
Note: The information provided is based on IRS announcements as of March 10, 2025. Affected taxpayers should consult the IRS or a tax professional for the most current guidance.
– Article provided by Taxing Subjects.
by Taxing Subjects | Sep 6, 2024 | Tax Tips and News
As part of the Dirty Dozen tax scams and fraud awareness effort, the Internal Revenue Service (IRS) encourages people to report individuals who promote improper and abusive tax schemes, as well as tax return preparers who deliberately prepare improper returns.
In this second installment of our overview of the 2024 Dirty Dozen, we look at the stern warnings issued by the IRS regarding scammers who promote schemes designed to evade taxes, scams targeting the wealthy, and dubious social media advice.
Tax Evasion Pitched as “Tax Strategies”
Thinly veiled tax evasion schemes come in various forms and can pose significant threats to taxpayers, sometimes even involving international elements—for example, concealing money and digital assets in foreign accounts or using foreign captive insurance and foreign individual retirement accounts.
“Taxpayers should be wary of anything that seeks to completely eliminate a legitimate tax responsibility,” says IRS Commissioner Danny Werfel. “[Scammers] continue to peddle elaborate schemes to reduce taxes and make a handsome profit. Taxpayers contemplating these arrangements should always seek advice from a trusted tax professional, not an aggressive promoter focused on pushing questionable transactions to make a buck.”
Some prominent examples include exploitative agreements related to syndicated conservation easements, micro-captive insurance arrangements, foreign individual retirement arrangements, and “hidden” digital assets.
Syndicated Conservation Easements
A conservation easement is a restriction on the use of real property. Generally, taxpayers may claim a charitable contribution deduction for the fair market value of a conservation easement transferred to a charity if the transfer meets the requirements of Internal Revenue Code section 170.
In abusive arrangements, scammers syndicate conservation easement transactions, offering investors the opportunity to claim charitable contribution deductions and corresponding tax savings that far exceed the amount invested. These arrangements generate high fees for scammers and attempt to exploit the tax system with grossly inflated tax deductions.
Micro-Captive Insurance Arrangements
A micro-captive, also known as a small captive, is an insurance company whose owners elect to be taxed on the captive’s investment income only. Abusive micro-captives involve schemes that lack many of the attributes of legitimate insurance, such as implausible risks, failure to match genuine business needs, and unnecessary duplication of the taxpayer’s commercial coverages. The premiums paid under these arrangements are often excessive, reflecting non-arm’s length pricing. The IRS has made enforcement against abusive micro-captive transactions a high priority, prevailing in related Tax Court and appellate court cases since 2017.
Schemes with International Elements
Scammers may also promote tax avoidance through contributing to foreign individual retirement arrangements, which allow contributions in a form other than cash and do not limit the amount of contributions by reference to employment or self-employment activities. By improperly asserting this as a “pension fund” for U.S. tax treaty purposes, the taxpayer claims an exemption from U.S. income tax on gains and earnings in, and distributions from, the foreign individual retirement arrangement.
The Foreign Account Tax Compliance Act (FATCA) plays a critical role in combating tax evasion by U.S. persons holding accounts and other financial assets offshore. It requires most U.S. taxpayers with financial assets outside the United States to report these assets to the IRS, and certain foreign financial institutions must report directly to the IRS about financial accounts held by U.S. taxpayers. Reporting requirements carry penalties for failure to file.
Despite these measures, scammers continue to lure U.S. persons into placing their assets in offshore accounts and structures, falsely claiming they are out of reach of the IRS. These assertions are untrue, as the IRS can identify and track anonymous transactions of foreign financial accounts.
“Untraceable” Digital Assets
Digital assets are digital representations of value recorded on a cryptographically secured, distributed ledger or similar technology. Common examples include convertible virtual currency, cryptocurrency, stablecoins, and non-fungible tokens (NFTs).
Scammers often falsely claim that digital assets are untraceable and undiscoverable by the IRS. In reality, the IRS can track anonymous transactions of digital assets globally. For federal tax purposes, digital assets are treated as property, and general tax principles applicable to property transactions apply to transactions using digital assets.
Aggressive Tax Strategies Targeting the Wealthy
The IRS has also issued a warning to high-income individuals about three specific tax traps designed by scammers and shady tax practitioners. Wealthy taxpayers are particularly susceptible to schemes that promise to reduce their tax burden but can lead to severe legal consequences.
High-income individuals often become targets for various aggressive tax strategies and schemes. These strategies can range from inflated art donation deductions to aggressive charitable remainder annuity trusts and complex shelters designed to delay the payment of gains on property.
Improper Art Donation Deductions
Some scammers exploit art donations by promising inflated values. These scammers encourage taxpayers to purchase art at a “discounted” price, which may include additional services like storage, shipping, appraisal, and donation arrangements. The scammers claim that the art is worth significantly more than the purchase price, encouraging taxpayers to donate the art after a year and claim a tax deduction for an inflated fair market value.
The IRS has a team of professionally trained appraisers who assist in valuing personal property and works of art to ensure compliance with tax laws. Commissioner Werfel warned, “Creativity in art is a beautiful thing, but aggressive creativity in art donation deductions can paint a bad picture for people pulled into these schemes. Taxpayers should be careful to understand the rules and watch out for inflated values or questionable appraisals.”
Charitable Remainder Annuity Trust (CRAT)
A Charitable Remainder Annuity Trust (CRAT) is an irrevocable trust allowing individuals to donate assets to charity while drawing annual income for life or a specific period. However, some scammers misuse CRATs to eliminate capital gains improperly.
In these schemes, appreciated property is transferred to a CRAT, and the transfer is wrongly claimed to provide a step-up in basis to fair market value. The CRAT sells the property without recognizing gain and uses the proceeds to purchase a single premium immediate annuity (SPIA). The beneficiary then reports only a small portion of the annuity as income, misapplying the rules to exclude the remaining payment as a return of investment. Taxpayers should be wary of such schemes, as they misapply the laws relating to CRATs.
Monetized Installment Sales
Monetized installment sales are another aggressive tax strategy used by scammers to defer gain recognition on the sale of appreciated property. In these transactions, an intermediary purchases the property in exchange for an installment note, which typically includes interest-only payments with the principal due at the end of the term.
The seller receives most of the proceeds but improperly delays gain recognition until the final installment payment, often scheduled many years later. This strategy can lead to significant legal trouble as it abuses the tax system.
The IRS urges wealthy individuals to remain cautious and seek advice from independent tax or legal professionals. By avoiding scammers and understanding the rules, taxpayers can protect themselves from schemes that distort tax laws and result in severe penalties.
Bad Tax Advice on Social Media
The IRS has also warned taxpayers about the dangers of bad tax information circulating on social media. Platforms like TikTok are rife with inaccurate or misleading tax advice, which can lead to serious consequences, including identity theft and tax problems.
Social media can often spread incorrect tax information, where users share wildly inaccurate advice. Some schemes involve urging people to misuse common tax documents like Form W-2 or more obscure ones like Form 8944, a technical e-file form not commonly used by taxpayers. Both scams encourage the submission of false information in hopes of obtaining a refund.
The IRS is aware of various filing season hashtags and social media topics leading to inaccurate and potentially fraudulent information.
Fraudulent Advice on Form W-2
One scheme encourages people to use tax software to manually fill out Form W-2, Wage and Tax Statement, and include false income information. Scam artists suggest making up large income and withholding figures, as well as the employer details. They instruct people to file the bogus tax return electronically in hopes of getting a substantial refund, sometimes as much as five figures.
According to the IRS, variations of this scheme involve misusing Form 7202 and Schedule H to claim credits and refunds based on false information.
Form 8944 Scheme
Another example involves Form 8944, Preparer e-file Hardship Waiver Request. False claims circulating on social media suggest that taxpayers can use this form to receive a refund from the IRS, even if they have a balance due. This information is incorrect. Form 8944 is intended for tax return preparers who request a waiver to file returns on paper instead of electronically.
Taxpayers who intentionally file forms with false information can face severe consequences, including civil and criminal penalties, such as criminal prosecution for filing a false tax return and a frivolous return penalty of $5,000.
Verifying Tax Information
The best place for taxpayers to learn how to properly use tax forms and follow legitimate social media channels related to taxes is IRS.gov. The website provides a repository of forms with detailed instructions and links to official IRS social media accounts.
Reporting Fraud
To report such activities, individuals can use the online Form 14242. The form can also be printed and completed to be sent by mail or fax to the IRS Lead Development Center in the Office of Promoter Investigations:
Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, CA 92677-3405
Fax: 877-477-9135
Alternatively, taxpayers and tax practitioners may send information to the IRS Whistleblower Office for a possible monetary award.
For more information, visit the IRS page on abusive tax schemes and preparers.
This article is for informational purposes only and not for legal or financial advice.
– Article provided by Taxing Subjects.
by Taxing Subjects | Jun 17, 2024 | Tax Tips and News
The Internal Revenue Service (IRS) has announced the agenda for the 2024 Nationwide Tax Forum, which will feature 45 seminars aimed at enhancing the skills of tax professionals. This year’s forum, which includes contributions from the IRS and leading tax associations, will cover a broad spectrum of topics designed to help tax professionals better serve their clients.
Diverse Seminar Topics and Keynotes
The 2024 agenda will encompass subjects such as tax law updates, managing client examinations, digital assets, the Secure Act 2.0, the Employee Retention Credit, and clean energy credits. Highlighting the forum will be a keynote address and plenary session where IRS leadership will discuss ongoing efforts to improve service and transform enforcement and compliance activities.
Focus on Cybersecurity and Fraud Prevention
In addition to regular tax law updates and ethics courses, this year’s forum will feature two panel discussions on cybersecurity: “Tax Pros and Security Real-Life Threats and Steps to Protect Your Business” and “IRS Security Summit and the Written Information Security Plan.”
Experts from the Pell Center will also present a session titled “Cybersecurity for Tax Professionals,” and three more seminars will focus on combating abusive scams, schemes, and fraud.
Special Events and Sessions
Apart from the regular seminars, attendees can join special events such as:
- Practice Management
- Scams and Schemes Panel Discussion with CERCA
- National Taxpayer Advocate Town Hall
- Beneficial Ownership Information Reporting
Bilingual Offerings and Continuing Education Credits
Six of the forum’s most popular topics will be presented in both English and Spanish. Attendees can earn up to 19 continuing education credits by participating in one of the five forums held on the dates and locations listed below.
IRS Nationwide Tax Forum Dates and Locations
The forums will take place in:
- Chicago, IL: July 9-11 (Standard rate deadline: June 25)
- Orlando, FL: July 30-August 1 (Standard rate deadline: July 16)
- Baltimore, MD: August 13-15 (Standard rate deadline: July 30)
- Dallas, TX: August 20-22 (Standard rate deadline: August 6)
- San Diego, CA: September 10-12 (Standard rate deadline: August 27)
Registration and Early Bird Discount
Tax professionals are encouraged to register by 5 p.m. ET on June 17 to benefit from the early bird rate of $255 per person, a savings of $54 off the standard rate and $135 off the on-site registration rate. After 5 p.m. ET on June 17, the standard pricing of $309 will apply until two weeks before the start of each forum (see above).
Association Discounts
Members of the American Bar Association (ABA), American Institute of Certified Public Accountants (AICPA), National Association of Enrolled Agents (NAEA), National Association of Tax Professionals (NATP), National Society of Accountants (NSA), and National Society of Tax Professionals (NSTP) can save an additional $10 off the early bird rate if they register by June 17.
For detailed information and registration, visit IRStaxforum.com.
– Article provided by Taxing Subjects.
