Tax Pros Should Stay Informed on Retroactive Tax Law Changes

Lawmakers in the House of Representatives approved a bipartisan tax package on Jan. 31. The changes laid out in the bill, which pairs business breaks with the child tax credit, would apply to the 2023 tax year right as filing season opens—and that’s a problem.

If passed, the new law would be retroactive for 2023. So how should tax professionals manage these changes if they become law?

First, take a deep breath. You’ve seen this before and survived. The pandemic gave rise to unprecedented, often quick, changes in tax laws, regulations, and policy. But unlike during the pandemic, we have advance warning. Below are several steps taxpayers and professionals can take to prepare.

Be informed. Know the main context of what’s in the bill: “To make improvements to the child tax credit, to provide tax incentives to promote economic growth, to provide special rules for the taxation of certain residents of Taiwan with income from sources within the United States, to provide tax relief with respect to certain Federal disasters, to make improvements to the low-income housing tax credit, and for other purposes.”

Reading the entire text of a bill isn’t for the faint of heart. It can be daunting and may leave you with more questions than answers. That brings us to the second step.

Monitor the bill’s progress. You want as much time as possible to deal with the changes, so position yourself to know the status. Sign up for bill tracking (there are several, but start with congress.gov), check IRS newsletters, updates, and broadcasts for news on the status of the bill.

Some tax professionals also rely on professional organizations that track legislation for guidance on these matters. Others rely on other professionals through a network—usually established through these same professional organizations.

Take inventory. Keep a roster of your existing clients to see who, if any, may be eligible for the tax changes proposed.

Prepare your clients. Let them know there is potential for changes mid-season. If they are potential beneficiaries of the changes, discuss the possibility of putting them on extension early and wait to see if the legislation materializes. That should avoid the need to file an amended return later.

Be kind to yourself. Don’t forget to prepare yourself mentally, emotionally, and physically. A normal filing season has its stressors, but when you throw uncertainty into the mix (retroactive tax laws, for example), those stressors get magnified.

Make sure that you get enough sleep and eat well. You can also take steps to further your self-care by practicing yoga or meditation and getting routine medical check-ups. Don’t be afraid to delegate or hire out tasks such as house cleaning, daycare, or errands to make your life easier.

If you’re really unhappy with the whole idea of retroactive tax legislation, contact your legislators. Or you can do as IRS Commissioner Danny Werfel has reportedly advised: Don’t wait for Congress, and file your return when ready.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Joyce Cheng is advocacy and governance manager for the California Society of Enrolled Agents and has more than 30 years of experience.

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