Getting into the Act

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Software developers lighten the load for practitioners grappling with the latest tax code changes.

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.

Partner Insights

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).
Of course, publishers of tax prep and tax planning software are incorporating these changes within their products, but so, too, are developers of fixed asset software. For example, in anticipation of states that won't allow these two tax breaks, Best Software is adding an override field to the Depreciation and Amortization 4562 Form section within its FAS Asset Accounting family that will allow the user to override the increased Section 179 amount. The Section 179increase is effective for tax years 2003 through 2005.
As with any tax law revamp, "we go through those [provisions] with a fine-tooth comb" to determine precisely how they apply and to which taxpayers, notes FAS product manager Kelly Clark. These findings are quickly coded into the software, "and we make sure they're available for download" by FAS customers.
Responding promptly to tax changes is important, says Clark. "When you start to go into the details [of any regulatorychange], you'll see there are many exceptions to the rule," she explains. "If you're using a spreadsheet, you might miss some of these exceptions, and that's when you get into real trouble.
"This is why people need FAS software that is updated constantly, because this [regulatory environment] is all so volatile," says Clark.
She recalls how the Job Creation and Worker Assistance Act of 2002 first implemented a special 30 percent bonus depreciation allowance. By installing FAS Asset Accounting for SQL Server, Chicago-based Edelman Public Relations Worldwide was able to track and depreciate thousands of computer assets across 43 locations. FAS automatically analyzed and determined which assets could receive the 30 percent allowance, saving the company $1 million in taxes.

Consider Lafler, Moore. To better serve its 800 tax clients, the firm subscribes to the monthly, online Tax Action Bulletins from Practitioners Publishing, which focus on implementation of new tax revisions. The service includes customizable, Microsoft Word-based letters for alerting clients to pertinent changes wrought by the Jobs and Growth Act. “That saves you a phenomenal amount of time,” says Lafler.

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.”

Rapid Response

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

BNA Software
Washington, D.C.
(800) 424-2938
www.bnasoftware.com

CCH Tax Compliance
Torrance, Calif.
(800) 739-9998
www.prosystemfx.com

Creative Solutions
Dexter, Mich.
(800) 968-8900
www.creativesolutions.com

Financial Profiles
Carlsbad, Calif.
(800) 237-6335
www.profiles.com

Intuit/Lacerte
Plano, Texas
(800) 765-7777
www.lacertesoftware.com

MasterPlan Financial Software
Vacaville, Calif.
(707) 451-8985
www.masterplanner.com

Practitioners Publishing Co.
Fort Worth, Texas
(800) 323-8724
www.ppcnet.com

RIA Tax Compliance
Carrollton, Texas
(800) 865-5257
www.riahome.com

Unger Software
New York
(212) 888-7200
www.methuselah.com

Take, for instance, the security transaction analyzer. As usual, the practitioner enters a description of the security, the owner, date acquired, date sold, sale price, and cost. The program will automatically classify the gain or loss in accordance with capital gains provisions in the Jobs and Growth Act.

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.

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