Planning Ahead

With ever-changing tax laws, tax professionals are using software to offer tax planning to their clients.


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At least Hurricane Katrina may have done something good for a few people: Smith, Turner & Reeves estimates its tax planning revenue will increase by 25 percent. Kim Miller, CPA and senior tax manager, attributes the growth to recent tax law changes, such as the Katrina Emergency Tax Relief Act of 2005.

"Since we're located in Jackson, Miss., we're doing a big push through email blasts and letters explaining to our clients what can be done," says Miller.

Passed in September, the act opened up planning opportunities for accountants to assist both individuals and businesses in dealing with the new legislation.

Partner Insights

For example, charitable contributions made between August 27 and December 31 for Katrina relief efforts will not be subject to 50 percent limitations, and will not be subject to the phase out under Code Section 68. "We will help clients determine whether they want to make contributions in 2005 or wait until next year," says Miller.

New Customers

A major trend likely to drive numerous people to tax planning in the coming years is the alternative minimum tax (AMT).

"At the moment, this is sort of a stealth factor, but the exemption has dropped dramatically and many people, especially those with higher property taxes as a result of increasing property values, will suddenly find themselves falling into the AMT," says Roy Luebke, director of tax software for BNA Software.

Laurence K. Zuckerman, CPA and director of educational services for Hauppauge, N.Y.-based AccountantsWorld, agrees, "AMT was supposed to be focused on the wealthy, but it's creeping down to the middle class. More and more accountants will have to do tax planning for new customers."

In fact, Kim Miller, CPA and senior tax manager at Jackson, Miss.-based Smith, Turner & Reeves, has already seen more individuals getting involved with tax planning due to the AMT. "Clients are coming to us and we're going to them when it comes to AMT. If the prior year a client was hit with the AMT, we recommend we get together to look over all their documents, and create a plan ahead so it won't hurt so bad this year," says Miller.

In addition, Torrance, Calif.-based CCH Tax and Accounting recently sponsored an audio conference on strategies for coping with the AMT. "AMT: Strategies to Escape Its Reach" was a 100-minute conference that taught professionals how to devise tax strategies for minimizing or eliminating the AMT; develop tax planning strategies to salvage itemized deductions, such as property taxes, state income taxes, legal fees and securities related expenses; and plan strategies to maximize the use of credits including the AMT credit. The conference cost $249 per site, and participants received a copy of CCH's Tax Planning Strategies: Tax Savings Opportunities for Individuals and Families (2005-2006) and Top Tax Issues for 2005.

Another area that needs planning guidance is retirement plan/IRA distribution. "Changes will more likely affect 2006 planning rather than 2005. For distributions received from August 25 through December 31, we will have to look at whether the taxpayer wants to elect to pay the tax over a three-year period or repay the account back within three years," adds Miller.

With ever-changing tax laws, tax planning has become a valuable service to clients. While vendors are adding tax planning software and increasing functionality, professionals are seeing an increase in tax planning opportunities.

"The frequency of tax law changes has increased dramatically. For example, Hurricane Katrina brought about nearly instant law changes. That's why practitioners need programs that are quickly and accurately updated," says Roy Luebke, director of tax software for BNA Software.

In fact, Torrance, Calif.-based CCH Tax and Accounting has seen more clients gravitating towards its ClientRelate product, due to its ability to plan for changes in advance.

"Customers are using ClientRelate to supplement traditional planning software such as ProSystem fx Planning, which provides what-if scenarios and projections. The benefit ClientRelate provides is that it's backed by the research and supporting documentation of CCH's tax editors," adds Ernest Zoumot, director of software product management.

ClientRelate allows professionals to customize the search criteria to match their client base or other specific requirements; continue their research with direct links to explanations and primary source materials, available through the company's Tax Research Network; and create what-if scenarios with interactive practice aids like downloadable spreadsheets and sample filled-in forms.

According to Zoumot, accountants see value in ClientRelate because they can now plan in advance for changes brought about by new legislation. "Based on queries for services or legislative changes created by the experts at CCH, accountants can determine exactly which clients will be affected by the changes and what additional services they may need. A perfect example of the value a planning tool like ClientRelate provides is the recent legislation that's resulted due to the damages of Hurricanes Rita and Katrina," says Zoumot.

Generating Additional Revenue

Tax Planning Vendors


Hauppauge, N.Y.

(800) 829-7354

BNA Software

Washington, D.C.

(800) 372-1033


Torrance, Calif.

(800) 739-9998

Creative Solutions

Dexter, Mich.

(800) 968-8900

Drake Software

Franklin, N.C.

(800) 890-9500

Intuit/Lacerte Software

Plano, Texas

(800) 765-7777


Fort Worth, Texas

(800) 323-8724


Carrollton, Texas

(800) 865-5257

Franklin, N.C.-based Drake Software is also looking for ways to give its preparers additional tools to generate revenue, and will do so this tax season by offering a tax planner with its tax preparation software.

"In consulting with our clients, we see a trend where more and more accountants are looking for revenue opportunities that not only integrate with their current business model, but are designed to utilize their current knowledge base and expertise," says James Stork, vice president of tax development.

Tax planning is just that. "It's ideal because it doesn't require a significant learning curve, and you can offer it on a small or large scale, from preparing estimates and helping taxpayers plan for changes in filing status, income levels and deductions, to more complex projections related to business ventures, asset management, and investment opportunities," adds Stork.

Drake's tax preparation software offers some tax planning and projection tools, such as a comparison worksheet, next-year estimated tax projections, depreciation schedules, and an amortization calculator.

The new Drake Tax Planner will focus on the more common tax planning scenarios this year. It will provide multi-year planning options and include many tax implications related to home adjustments, filing status, dependencies, retirement savings, and education expenditures. Drake is also developing a report generator module to include with the Planner.

"Our goal with the report generator module is two-fold. One is to provide the tax professional with data to help them efficiently review the tax planning scenarios discussed with their client. The second is to provide the taxpayer with a clear picture of what their options are for minimizing their tax burden based on the scenarios discussed. We plan to include charts, summaries, tax tips, and other relevant data to create that clear picture," adds Stork.

The Tax Planner will be included with the tax software at no additional cost. "Our customers can easily export data from the tax program rather than rekeying the data. In addition, it's a one-click transfer from the tax software to the tax planner, so a preparer can seamlessly work on the tax return and on tax planning while the taxpayer is in the office," says Stork.

Dexter, Mich.-based Creative Solutions has always encouraged its professionals to turn tax planning into a revenue generator.

"Smart professionals see tax planning as additional revenue and customers value it. Tax planning should go on all summer so customers can activate their plans, and realize the benefits in the tax period," says Jack LaRue, vice president of marketing.

Planner CS starts at $500 and integrates with UltraTax CS and RIA's GoSystem. Main features include the ability to analyze multiple tax strategies over multiple years, and built-in full-color graphing capabilities that can generate bar, pie, and line charts.

LaRue explains, "A firm runs a tax plan and executes a strategy that will save the client $2,000 in taxes this year. However, if the firm then carries the plan out over the next five years and saves the client $10,000, customers will pay more for a plan that saves them $10,000 over a five-year period."

Tools for the Proactive Planner

Fort Worth, Texas-based PPC's goal is to help professionals identify, communicate, and implement tax plans for their customers, with the company breaking tax planners into three segments.

Proactive planners seek tax savings for clients and look to grow their firms, while reactive planners do not look for opportunities, but react to something a client has done or is considering doing. Finally, there are professionals who take no action when it comes to tax planning.

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