Tax Planning in Demand


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There's a new kid on the tax planning software block. Well, sort of, but not really. In a market in which BNA Software has long been the dominant player, TaxWise, the Rome, Ga.-based accounting software vendor, has become the latest player to leap into the market with TaxWise Tax Planning, which just happens to be a TaxWise version of the BNA Income Tax Planner.

"Tax planning was a feature that was in big demand by our customers," says Ben Armour, TaxWise's director of marketing.

Instead of building its own tax planning software, TaxWise decided to resell BNA's product as a comprehensive tax planning program, Armor says. "We're putting together a best-of-breed application," he says. TaxWise also offers, for instance, access to the CCH Master Tax Guide.

Partner Insights

TaxWise is charging about $3,200 for a suite of its tax preparation and accounting software, with features including fixed assets, trial balance, CCH research access, and the BNA Income Tax Planner. For a suite that covers all 50 states, the price goes up to about $3,500.

As the TaxWise experience shows, the demand for tax planning software continues. As tax laws change, and as taxpayers find more ways to supplement their income with investments, tax preparers can benefit from a growing market for tax planning services. Calculating the best plan to maximize after-tax income from both salaries and investments can be a time-consuming chore.

Over the last few years, the number of entries has grown, as companies such as Creative Solutions set out to challenge BNA, whose product is still used by a variety of 1040 providers.

CSI has done a good job, according to Glenn Hanner, a principal with Hanner & Associates, in Bedford, Texas, who says he finds the Ultra Tax Planner particularly helpful for clients who need to decide how to spread income over multiple years.

"There's no substitute for a full-blown planner to look at multiple years and scenarios," Hanner says. "If a client wants to look at spreading income over several years, to see if it's better to take investment income at once or spread over three years, UltraTax Planner makes it easy to see that."

UltraTax Planner also supports the import of client data from the UltraTax tax preparation software, a feature Hanner figures can save hours of data entry on plans looking at multiple tax scenarios over two or three years.

This year, the CSI product will be able to plan for a client's requested end-of-year tax balance due, based on the expected income from capital gains and other income. "Capital gains are one of the many things that could change before year-end in terms of dividends or interest," says Teresa Mackintosh, CSI's director of marketing.

The new feature lets users calculate the proper amount of itemized deductions a client would need to report, for example, to show a zero balance due at the end of the tax year after factoring in expected income and investment gains. "Instead of manually calculating different scenarios, this works as a what-if analysis tool and reduces the scenarios the accountant has to think up," Mackintosh says.

Other core computational features include:

* Calculating the proper number of exemptions and tax withholdings based on a client's preferred end-of-year balance due or refund. Mackintosh says, "The software backs in what the withholding number should be, so you don't have to guess at what the withholding should be."

* The ability to track key indicators, such as adjusted gross income, taxable income, refund or balance due, in a Watch Window feature that displays the indicators constantly at the bottom of a practitioner's computer screen. "No matter what screen in a tax plan a practitioner is viewing, she can see indicators at the bottom of the screen, so there's less navigation," Mackintosh says.

UltraTax Planner also provides built-in word processing and graphics capabilities for developing client presentations. "It will print a detailed 30- to 40-page report showing different scenarios with a summary page," Hanner says. "It makes it easier to bill for our services."

UltraTax Planner also integrates with the UltraTax and GoSystem tax preparation software applications from RIA for automatic import and export of data. The price, unchanged since last year, starts at $500, plus $100 for the first state and $50 for each additional state. The software supports 45 states, and the District of Columbia.

Lacerte la Carte

For the first time, Lacerte Software is now offering a pay-per-plan option to enable preparers with low volume to justify using the 2004 Federal Tax Planner.

"We had quite a few customers that provide tax planning, but not enough to warrant an unlimited-use product," says Jorge Olavarrieta, senior product manager. For a $25 fee, a Lacerte customer will be able to create, modify, print, and process a tax plan file, which will include both the federal and state tax plan.

Customers will pay for the plan they wish to process, no matter how many states are involved.

Also new, the 2004 version allows practitioners to enter part-year W-2 information and have the software calculate forecasted year-end wages based on the date of the entered pay period and the client's frequency of payments. The projected year-end figure is then automatically flowed to the wages-input sections of the application.

Veteran Lacerte user Theodore Kleinman, a sole practitioner based in Redmond, Ore., says one of Lacerte's strongest features is its ability to produce graphical client presentations showing multiple what-if scenarios.

A client may get a bonus and want to know how it will affect his taxes if he takes half the bonus this year and half of it next year," says Kleinman, who beta-tested the 2004 software. "In the past, our presentation would basically be a mark-up of the 2003 tax return. The data would be accurate, but it would not be presentable."

Lacerte users now can export clients' current-year tax information into an existing tax plan file in order to perform detailed tax plans that can be carried forward and updated year to year. "This will allow for more accurate planning, as the preparer will be able to maintain a multi-year tax plan and simply update it with current-year data once the tax return is completed," Olavarrieta says.

Lacerte has also introduced a new system for notifying users of software updates, a method of entering part-year income to project year-end figures, and the ability to export data to subsequent-year forms to support multi-year plans. It also added support for seven additional states -Indiana, Maryland, Ohio, Minnesota, Oklahoma, Wisconsin, and Louisiana-for a total of 22 states supported.

"We're providing a more pro-active means of notifying customers when updates to the planner are available for download," Olavarrieta says. Although Lacerte customers can receive email notifications of updates that can be downloaded over the Internet, there are many cases where practitioners failed to receive notification due to incorrect or outdated email addresses. The new feature lets users program scheduled alerts in their computer task bar, producing pop-up reminders to check for updates.

Other Lacerte features include:

* A Watch List that allows users to select any field within the Tax Planner to display below the main worksheets, allowing the preparer to quickly see the result of changes in information entered into the worksheets.

* A diagnostics feature that alerts the preparer to information inputs that may have been overlooked or that might be inconsistent.

* Password-protected tax planning files prevent unauthorized exporting of client data from a tax preparation to a tax-planning application for the purpose of revealing confidential financial information.

The Lacerte 2004 Federal Tax Planner is priced at $415, up from $395 for the 2003 Federal Tax Planner. The 2004 software includes charges of $55 for each state module, or $160 for an all-states package.

CCH's New Face

CCH Tax and Accounting is working to give preparers a comfortable look-and-feel for its tax line with a worksheet view.

That spreadsheet-style interface has been installed on the CCH ProSystem fx Tax and Planning applications. The application also lets users configure customized screens.

Users can also now forecast up to 30 tax scenarios per plan, and they will be able to pinpoint plan differences by percentage or dollar amounts, and enter data points for instant, automated calculations.

The software provides for complete calculations for the deductibility of IRA, Simple, SEP, and Keogh contributions, and phase-out calculations for itemized deductions, personal exemptions and alternative minimum tax exemptions for high-income individuals. The planner is priced at $400, up from $375 for the 2003 version.

But CCH's planning efforts go beyond the tax planner, to the company's Web-based ClientRelate program, which helps practitioners identify clients who may need assistance planning around particular issues or problems, says Jane Hoffman, portfolio managing editor. "We added a tool that makes it easier for practitioners to identify taxpayers that need help in certain tax areas," Hoffman says.

Practitioners identify particular issues that may need to be addressed, then use ClientRelate to search their client database of returns prepared in ProSystem fx Tax for clients who are likely to need assistance with, say, the alternative minimum tax.

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