Software developers lighten the load for practitioners grappling with the latest tax code changes.
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by Richard McCausland
Whether they know it or not, “CPAs are always tax planning,” contends Henry (Chip) Lafler, senior partner with Lafler, Moore & Webb in Roseville, Calif. Whether they formally identify tax planning as a discrete practice area or informally dispense advice on tax-deferral opportunities and alternative minimum tax relief, practitioners are in the habit of helping their clients to think ahead.
That mission has gained urgency with passage of the hugely intricate Jobs and Growth Tax Relief Reconciliation Act of 2003, with its assorted rate reductions, higher standard deductions, advance credit payments, and fluctuating sunset provisions. Fortunately, providers of tax planning software and online services are assisting accountants and other financial professionals in making their way through this thicket.
|FAS on Their Feet|
Two provisions within the Jobs and Growth Act directly affect fixed asset management. Geared toward businesses investing in new property, these provisions call for an increase in the bonus depreciation (from 30 to 50 percent)and an increase in the Section 179 expense deduction (from$25,000 to $100,000).
His firm also uses the Tax Planning module within the MasterPlan financial planning package, because “they’re right on top of [any tax law] changes.” And the practice, which is a Lacerte Tax stronghold, recently added the Lacerte Tax Planner. “We like the integration. It’s certainly convenient being able to transfer that data” from a completed tax return to a planning worksheet, comments Lafler.
In fact, Lacerte is seeing a noticeable increase in demand for Tax Planner, which reflects an increase in taxpayer demand for planning services—especially in the wake of the new tax law, says senior product manager Jorge Olavarrieta. “Every one of [the practitioner’s] customers is thinking, ‘How is this going to impact me?’ and they are relying on their accountant as a guiding force to help them,” he explains.
By early summer, CCH ClientRelate was already positioned to assist users in analyzing ProSystem fx Tax data and identifying clients affected by the new law. A series of bulletins—on such JGTRRA-related topics as bonus depreciation and AMT relief—includes a sample client letter explaining the relevant provisions. A spreadsheet within the Tax Relief for Individual Taxpayers Bulletin even allows the practitioner to quantify the law’s impact on clients.
“Practitioners really need to show their value to their clients year-round,” says CCH product manager Marcia Suelzer. “This is not just about crunching numbers.”
Eighteen business days after President George W. Bush signed the Jobs and Growth Act into law on May 28, Creative Solutions issued an update to UltraTax Planner, reflecting virtually all provisions of the new law, including retroactive changes and those affecting future tax years. Updates to the UltraTax compliance package itself, including Depreciation and data-mining DataBase Manager components, were available even earlier.
In addition, the UltraTax Planner W-2 calculator was updated; the Form 2210 underpayment penalty interest rate was adjusted; and the New York State Planner module was updated. (A provision increasing bonus depreciation does not apply to qualified New York Liberty Zone property.)
“Updates to our diagnostic programs also ensure that users receive informative analysis in the form of reminders or cautions for each specific return that may be affected” by the latest regulatory changes, comments Arthur Ruzzano, marketing director for Dexter, Mich.-based CSI. This built-in analytic depth means that once the practitioner has entered raw source data, the various tax programs can deliver “complete” income and tax liability calculations and projections based on the JGTRRA changes, according to Ruzzano.
The goals are ease of use for the practitioner and customer satisfaction for the client, notes Ruzzano. CSI has long encouraged tax professionals to offer planning services. “Of course, in years when new tax legislation is enacted, tax planning requirements create additional opportunities for the tax professional,” observes Ruzzano.
Taking a “clientized” explanation of the new law developed by sister company RIA, Creative Solutions made this available to users of its hosted Web site service. “This easy-to-understand explanation helped our professional users disseminate new law information to their client and prospect base through their firm Web site,” says Ruzzano.
Also, within the updated DataBase Manager are pre-defined client letters specific to the Jobs and Growth Act. Ruzzano comments, “These letters, coupled with the more than 20 predefined searches in DataBase Manager, quickly and easily enabled our users to identify and contact their clients affected by certain changes in the law.” These are, after all, “likely candidates for additional tax planning and consulting services.”
Harvey Gelfand of New York-based Gelfand Advisory Services notes, “The year isn’t even over yet, but TaxPlanner has all these [JGTRRA] changes in it, and it has them perfectly.” He’s already been running scenarios for clients, including young couples thinking about buying a house. “I can show them how much their tax savings will be, and how much money they will have to pay toward a mortgage,” he says. TaxPlanner allows him to make these projections confidently, because “I’m giving you [results based on] what the current law is.”
BNA Income Tax Planner is fully compliant with the 2003 tax law. Because the individual income tax rate reductions were retroactive to the beginning of the year, BNA released an initial update on June 11 to accommodate taxpayers who might want to reduce their quarterly estimated federal payment due June 15. “We responded with a complete solution on June 24,” notes Carol Woodfield, CPA, tax applications domain manager for Washington, D.C.-based BNA Software.
“Essentially we try to make this complex act simple—and as painless as possible” for practitioners, she comments. All the various rate increases and decreases and fluctuations are embedded in the software code. “In general, most of the changes are invisible to the user,” says Woodfield.
|Tax Planning Vendors|
CCH Tax Compliance
MasterPlan Financial Software
Practitioners Publishing Co.
RIA Tax Compliance
There are flags built into the system to alert a tax planner that certain provisions are slated to phase out or revert to earlier status. Also, “Every single row of entry and even the calculated rows are in the Help system,” notes Woodfield. BNA continues to update its state products, as each state determines to what extent it will adopt the changes mandated by JGTRRA. “That has been one of our big challenges,” says Woodfield.