Tax planning started as a natural response by practitioners whose clients asked how they might fare on next year's return if they engaged in certain transactions during the year ahead.Practitioners who could answer those questions grew their practices into year-round enterprises, while at the same time building client loyalty.

As a result, most tax prep software now has the capability to do simple "what-if" projections, and some have stand-alone modules with stronger capabilities. For example, Franklin, N.C.-based Drake Software has three-year projection capability built into its Tax Solution, and TaxSimple, based in Randolph, N.J., has numerous tax planning worksheets to project tax liability.

Meanwhile, CCH and RIA have gone a step further with their ClientRelate and Tax Alerts, which do the heavy lifting in finding tax planning engagements. These products use data-mining tools that link the companies' tax compliance and tax research products to identify clients who may require tax planning services due to legislative or regulatory changes.

For Holliston, Mass.-based practitioner Larry Novick, planning is essential. "It's very helpful in building client loyalty. From a cash-flow perspective, it's useful for people to know ahead of time what their situation is. Without it, they stand in front of you in January and say, 'Guess what I did last year,' and I say, 'Guess what it'll cost you.' If they ask me during the year, we can plan, and try to do something to limit the tax liability."

There are a number of avenues to limit liability through tax planning, according to Novick. One of the biggest involves the alternative minimum tax. "Where there's an option to pay state income tax this year or next, you have to run the numbers to see if paying it this year will hurt you on the federal AMT," he explained. "Tax planning is one more tool for accountants to offer, and something you can charge for, or do as a goodwill gesture to build client loyalty."


Washington-based BNA sells its Income Tax Planner as a stand-alone product. It provides automatic interfaces with major tax compliance programs such as GoSystem, Lacerte, ProSystem fx and UltraTax CS. It provides federal income tax projections for up to 10 years or cases, and seven modes of analysis, including years within cases, cases within years, adjustments, difference, and taxpayer-spouse, annualization, and minor child.

The Income Tax Planner enables the planner to specify whether to sunset the provisions of the 2001 tax act. Linked Client Letter lets the user write a client letter while still in the program and link amounts from the analysis to the letter. These figures are automatically updated in the letter whenever the analysis changes.

Rome, Ga.-based Universal Tax Systems now offers 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 vice president of marketing Gene Goldenberg. "We now have an entire accounting suite which ranges from tax prep software to tax planning, fixed assets, write-up and trial balance."


Riverwoods, Ill.-based CCH produces two planning capabilities for its ProSystem fx Tax product, according to director of software product management Ernest Zoumot. "Tax Projector is part of the ProSystem fx Tax program," he said. "It allows the preparer to see the taxes due for that particular client for the next year based on current-year data."

ProSystem fx Planning is a separate module, and is much more detailed, according to Zoumot. "ProSystem Planning integrates with ProSystem Tax to act as the base year, and from there the practitioner can project out to multiple years, and use legislative rate changes within Planning to automatically compute future years' taxes."

It can forecast up to 30 scenarios per plan, and can pinpoint plan differences by percentage or dollar amounts. It also provides detailed diagnostics, and can generate a report within the system based on the client's data.

CCH's ClientRelate moves the planning process ahead a step by combining its Tax Research Network with ProSystem fx Tax to pinpoint clients who are affected by new tax developments or who may benefit from additional services.

It also includes sample client letters, spreadsheets and filled-in forms for a client's particular situation. The practitioner can customize her own search criteria to identify clients.

Creative Solutions and RIA

Dexter, Mich.-based Creative Solutions likewise provides tax planning within its Ultra Tax CS compliance software, with a tax projection worksheet that takes you out an additional year, according to vice president of sales Jack LaRue.

"For more sophisticated projections, there's the UltraTax Planner CS," said LaRue. "It can handle an unlimited number of years or scenarios, so you're looking at multiple properties or multiple timings on redeeming stock options or cashing in IRAs. It allows you to take out and compare multiple different scenarios and extend them to multiple different years."

"The client will value the advice more if you can show, say, a $10,000 savings in tax over five years, rather than a $2,000 savings this year," he said.

Planner CS has built-in graphing capability, and works not only with federal Ultra Tax CS software, but also with all of the states. In addition, nonresident state calculations have been added for 11 states this year, according to LaRue.

In addition to importing data seamlessly from UltraTax CS, UltraTax Planner CS integrates with sister Thomson business RIA's GoSystem compliance software. Beginning in December, UltraTax will also integrate with Tax Alerts, RIA's Web-based compliance and planning service. Tax Alerts is an integrated approach to tax research and compliance, keeping the practitioner informed of important events that could potentially affect specific clients. The service recommends specific actions to take, and includes suggested client letters to explain the issue.

"The practitioner can run specific returns and get back exactly what developments have affected the client within a date range that the practitioner specifies," said product manager Mark Sheiner. "These results can give the practitioner another good reason to talk to their clients and possibly generate additional revenue."


Plano, Texas-based Lacerte Software incorporates planning tools in its basic compliance software, which allows 10-year forward projections. Lacerte Tax Planner goes further, allowing the projection of future tax liability in multiple scenarios.

"Our customers are finding that tax planning is one of the most profitable secrets out there," said senior product manager Jorge Olivarietta. "People who take advantage of it find that it not only benefits their business, but really helps their clients."

The Tax Planner can generate plans on the basis of a year/case analysis, a filing status comparison, a difference analysis, and an adjustment analysis. A new provision allows users without enough clients to justify an unlimited-use product to pay $25 per plan to use the Tax Planner.

Lacerte also has Tax Analyzer, which helps find potential current and future tax savings by identifying clients who could be affected by new tax laws.

"It automatically generates ideas which the accountant may want to consider," said Olivarietta. "For example, it would suggest that a particular taxpayer might want to contribute more to his individual retirement account because the limits are increasing, and it calculates the effect this will have on the overall tax."


Kaysville, Utah-based TaxWorks offers its TaxPlanner as a stand-alone or as an addition to its TaxWorks compliance software. "It's an easy-to-use 'what-if' tool, and allows the accountant to compare five different tax scenarios on the screen at the same time," said company spokesman Alan Haacke.

ClientRelate, Tax Alerts and Tax Analyzer are the latest of an ongoing evolution of tax planning tools. As Olivarietta notes, tax planning is part of a larger puzzle.

"It's one of the pieces of the larger financial planning picture - looking at life's events and seeing what impact those would have on the future tax liability of a taxpayer."

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