Nov. 2009

Top 4 Tax Planning Solutions 2009

5-Minute Estimates Keep Clients Happy

By George Lawton

A number of tools are available to help CPAs quickly create plans to save clients money. "Tax planning provides a nice income stream for us," says Thomas E. Pickel, CPA, partner with Pickel & Bruckner, LLC in Salina, KS. "We can do it relatively quickly." Using Lacerte Tax Planner, he is able to create tax plans for his clients on the fly.

"The quick turnaround impresses the client," Pickel says. "They now have a valuable tool, which has greatly increased our service's worth in the client's mind. Because of the speed, I will have clients that come to me in September for a 2009 estimate, and some of the same people will come back in December for a second plan. They don't mind paying twice because they end up saving more money. In some cases, I can create an estimate in five to 10 minutes."

Not only does planning benefit the clients, it also helps boost the CPA's revenues during the slow off-season. "It is a highly profitable service that we can offer outside of the busy season," Pickel says. "In some cases, I am making 175 percent to 200 percent of my hourly rate on a tax return. My more sophisticated clients are willing to pay the full price for this whether it takes 15 minutes or two hours, which makes it rather lucrative."

Many CPAs see planning as a necessity to keep clients coming back. "Planning is something you have to do if you want to serve your client's best interests," says Betty Maines, CPA, senior tax manager at Sibley & Company P.C., in Dallas, TX, which also uses Lacerte Tax Planner. "It is not so much a matter of the number of times we use it as the importance of when we use it. We do it for our largest and most significant clients who want to see the tax impact of different choices."

Many different planning tools are available to help taxpayers understand the steps they need to take to improve their bottom lines. Charles Marshall, software consultant for CCH ProSystem fx Planning says: "The CPA can create a product the taxpayer can understand. Not only does a good tax planning application develop a plan, it comes up with the numbers to support it."

No Surprises
One of the key benefits of tax planning software is that CPAs don't have to be the bearers of bad news when taxes come due. It is much easier for clients to prepare for taxes ahead of time than to be caught off guard.

Jorge Olavarrieta, Intuit's Group Product Manager for Lacerte says that one of the most frustrating things for a CPA is delivering unexpected surprises to the taxpayer. "The fact that you owe $20,000 is hard to swallow, but it is more palatable when you know it is coming."

Chad R. Turner & Associates, in Torrance, CA, uses BNA Income Tax Planner for most of its high-end clients. Chad Turner, principal at the firm says: "We use tax planning so there are no surprises for our clients. It helps with calculations for determining a client's liability, for calculating estimated tax payments or to help them manage their taxes."

With BNA, he can run 10 different scenarios, such as whether to make a pension contribution or see the tax impact of prospective changes in income from an S Corp. "Tax Planner gives me the flexibility to manipulate a lot of the projected data and get answers quickly," Turner says.

For example, AMT can be complicated, and clients sometimes don't know if they would fare better with AMT. Turner can run a pair of cases and keep increasing or decreasing income by small increments to determine the level of income at which the client will become subject to AMT.

Keeping Up With the Law
Fortunately for CPAs, tax planning tools can make it easier to learn about and apply changes due to regulations or tax rulings. For example, the American Recovery and Reinvestment Act has a wide range of tax implications, such as a first-time homebuyer credits, sales tax reductions for vehicles and extended credits for energy-efficient home improvements. Tax planning tools can help CPAs make their clients aware of opportunities and pitfalls.

"Many people are taking actions without letting the accountant know," Olavarrieta says. "If the client discusses issues with the accountant, the accountant can help the client make the optimum tax liability decision. The fact that someone put new insulation on their home might come as a happy surprise at tax season, but with the accountant's advice, the client might have been able to save more."

A Win-Win Situation
Tax planning can be an important service in every CPA's practice. Until taxpayers have experienced the impact of tax planning, it is hard for them to spend the additional dollars. But when clients see how easy it is to save a few thousand dollars in taxes, it's hard for them to ignore planning.

The biggest challenge might be getting the clients to try it out. As Lacerte's Olavarrieta says: "The most successful accounting practices take more aggressive approaches on tax planning. If you are passive, [clients] will be less likely to adopt it. But when they do, it is a win-win for everybody."