What started as a natural progression of tax preparers doing simple projections a year or two into the future has evolved into a true value-added practice for their clients, generating both client loyalty and additional income.At the same time, the ability to do these projections has evolved from a capability that is built into most tax preparation programs, into a separate tax planning module. Along the way, RIA and CCH have raised the stakes in tax planning software with their Tax Alerts and Client Relate, which do the spadework in finding tax planning engagements.
Both Tax Alerts and Client Relate link the companies' respective tax compliance and tax research products to identify clients who may require tax planning services as a result of regulatory or legislative changes with tax implications.
For New York-based CPA Marc Albaum, tax planning is an important part of providing services to his clients.
"We generally look at last year's return and the current return, and go over what's happening and any actions that the client may be considering," he said. "Clients find it helpful to have an idea about the tax consequences."
Before the 2004 presidential election, many clients called Albaum to ask about the tax consequences that they might face depending on which candidate was elected. "We discussed the candidates in terms of tax rates and the chance of eliminating the alternative minimum tax," he said.
Although most tax preparation software allows the preparer to make simple projections, the more complex returns require the power of the stand-alone planning modules.
Washington-based BNA sells its Income Tax Planner as a stand-alone product. It can import data seamlessly from tax compliance programs such as Lacerte, ProSystem fx and GoSystem. It calculates federal income tax projections for up to 10 years, and allows the practitioner to specify whether or not to sunset the provisions of the 2001 tax act. It can handle income for K-1s and 1099s on an activity-by-activity basis, and automatically manages complex tax limitations and phase-out provisions.
Rome, Ga.-based Universal Tax Systems is now offering BNA's Income Tax Planner to its TaxWise clients. "We worked with BNA to create a tax planning module which integrates completely with TaxWise," said company spokesman Ben Armour. "We now have an entire accounting suite which ranges from tax preparation software to tax planning, fixed assets, write-up and trial balance. To round out the suite, we have partnered with CCH to provide research capabilities."
Riverwoods, Ill.-based CCH's ProSystem fx Tax incorporates some planning features, allowing the practitioner to use current-year information and project figures for the upcoming year, according to Ernest Zoumot, director of software product management.
"However, the planning module is a lot more detailed," he explained. "ProSystem Planning allows the practitioner to start planning with base-year amounts already set up by importing information directly from ProSystem fx Tax. It provides expanded forecasts with up to 30 tax scenarios per plan, and can pinpoint plan differences by percentage or dollar amounts."
"It provides detailed diagnostics," he continued, "and can generate a form within the system based on the client's data. For example, it will look at different scenarios within the tax return and create a report that might suggest, say, the grouping of medical expenses."
CCH's ClientRelate carries the planning process one step further by combining its Tax Research Network with ProSystem fx to pinpoint clients who are affected by new tax developments or who may benefit from additional services.
ClientRelate delivers tax bulletins relating to new developments to the practitioner's desktop, and provides a link within the document to search the database of returns in ProSystem fx Tax. It generates a list of clients potentially affected by the issue, and links to sample client letters and other practice aids.
"Client Relate saves an e-copy of the results so the practitioner can pass them on via e-mail," said portfolio managing editor Jane Hoffman. "It's ideal to run against several clients, so that when the customer comes in, the practitioner has an idea of what to talk about."
"For example," she said, "a planning bulletin might identify a taxpayer who has been close to alternative minimum tax liability in the past, so the practitioner can advise the client on steps to take to reduce or eliminate exposure to the AMT."
From tax prep to tax planning
Dexter, Mich.-based Creative Solutions provides some tax planning within the Ultra Tax preparation software with a two-year projection worksheet, according to vice president of sales Jack LaRue.
"But for more sophisticated projections, we suggest the UltraTax Planner," he said. "The UltraTax Planner can handle an unlimited number of years forward with multiple scenarios, so the practitioner can show the true impact of a strategy. It comes into play in reinforcing the impact of a particular strategy to the client."
The UltraTax Result Finder can take a particular field, such as tax due or capital gain or alternative minimum tax, and pinpoint what a taxpayer needs to do to achieve a result for that field.
"For example, a high-income tax client is considering a myriad of investments, all of which have the potential of throwing him into an alternative minimum tax position," said LaRue. "With Result Finder, the professional can find the best mix of investment attributes from a tax position that will maximize investment potential while falling just below the level that triggers AMT."
In addition to importing data seamlessly from UltraTax, the UltraTax Planner integrates with sister Thomson business GoSystem's preparation software.
"A lot of our customers are large firms that deal with extremely complex returns," said GoSystem product manager Boyd Gackle. "Many of them have their own home-grown systems. We also have exports to BNA Income Tax Planner and Creative Solutions Ultra Tax Planner."
GoSystem's data mining engine, FormSource, can be used to identify planning opportunities from the simplest to the most complex returns, according to Gackle. "It can search the entire universe of tax returns and identify which ones meet the desired criteria," he said.
FormSource is one of the components of Tax Alerts, RIA's Web-based compliance and planning service. "RIA tax editors identify tax law changes as they occur, and we provide FormSource queries that identify the particular returns that are affected," said Gackle.
For GoSystem Tax RS and InSource Express RS users, the service provides a summary report on the number of clients affected by a reported tax development. It gives a description of the data queries used to determine the impact on completed RS tax returns. The service also provides links to a database of client letters to explain tax developments to clients who are affected by the development.
Tax Alerts is now a part of RIA's Checkpoint platform, according to Mark Sheiner, product manager of Checkpoint and Tax Alerts.
"All our Tax Alerts clients are accessing the service at Checkpoint through the practice development tab. As a result, Tax Alerts has picked up a lot of functionality from Checkpoint that it didn't have before, including schedule searches, a thesaurus, spell check and a search within results."
In the near future, two features are being added that will increase the usefulness of Tax Alerts: a form line finder and a search by affected clients.
"Line Finder will link from the line on the tax return to the appropriate line on RIA's Tax Return Guide, and from there to other RIA services," Sheiner said. "The other benefit - a search by affected clients - would be able to take a return and run it against a date range of developments to determine if it is potentially affected by a tax development. It generates a list of developments that affect that return, and allows the practitioner to decide which ones he needs to discuss with his client."
What if ... ?
San Diego-based Intuit's ProSeries has a built-in capability to project "what if" scenarios forward for 10 years. Its Lacerte Tax Planner goes a step further, allowing the preparer to project clients' future tax liability under multiple scenarios and provide a detailed professional report.
It can generate tax plans on the basis of a year/case analysis, a filing status comparison, a difference analysis and an adjustment analysis.
For next tax season, users who lack enough clients to justify an unlimited-use product will be able to pay $25 per plan to use the Lacerte Tax Planner.
Kaysville, Utah-based TaxWorks provides its TaxPlanner as a stand-alone planner or as an addition to its TaxWorks tax preparation software.
"It allows the practitioner to compare five different tax scenarios on the screen at one time, and can project up to five years in the future," said company spokesman Alan Haacke. "A planning program such as ours allows the practitioner to suggest to clients some planning opportunities, or ways to avoid pitfalls such as the alternative minimum tax. It's a way to develop client loyalty as well as possible additional income."
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