As the year winds down, tax professionals are gearing up for the coming season by checking supplies, test-driving software, training additional staff, and packaging year-end planning tips to their clients."It's never too late for tax planning," said New York City-based CPA Marc Albaum. "You've got till the ball drops to take action, and if you do it later than that, then you've got an early start for 2006."
"Year-end planning helps you do two things at once," noted John Battaglia, director of Deloitte & Touche's National Private Client Advisors Practice. "At the same time you're getting the information together for tax planning, you're organizing to do the return itself, so there's less work in March."
"One of the most important things prior to tax season is to look at your engagement letters and update them with regard to the various new rules," added Battaglia. "And if you send out organizers, you might want to suggest your software provider customize it, to hit certain aspects for your practice. Look at the provider's organizer and customize it to meet your own business needs and those of your clients."
The use of temps can ease the pain of preparing for tax season, particularly for preparers who predominantly do individual returns, said Battaglia: "It's always good to use temps where you can. The semi-retired can be very valuable for two reasons: first, because of their experience and work product, and second, because there's no need to carry them during the year just to have them when you're very busy."
"The most important thing is training," he said. "The best time to train new employees is [between] now and January. It's best to train people right before they're about to do what you train them to do."
"If possible, it's also better to have them do actual work instead of case studies. It's more efficient and gets better training results," said Battaglia. "When they do actual work from start to finish, it actually teaches them what they are going to do. Even if you use a case study, you should try to make it as live as possible."
Eric Rudner, a CPA with the Tucson, Ariz.-based firm of Ludwig, Schacht & Klewer PLLC, said that the firm is still looking for additional help. "We're looking for full timers, but we may take on a professional on a per diem basis," he said.
Rudner tells his clients that there's still time for year-end planning. "They can purchase equipment if they need it for a Section 179 deduction, and they can manage retirement plan contributions for a maximum deduction."
Paperless in 2006
Although CPAs have been at the forefront of software technology for their clients, not all have been quick to adopt new technology in their practices. This year, many are moving to a paperless environment in tax preparation.
"The big thing for us is going paperless," said Barbara Montour, a CPA at Dragon Benware in northern New York State. "The people we talked to who have done it have good things to say. Initially, we'll just be using it to file and store tax returns. Eventually, we'll probably go completely paperless."
Joe Harpaz, vice president of business development at document management concern GoFileRoom, sees increasing interest in paperless solutions.
"Even at this time of year, firms are looking at implementing a variety of technologies for the upcoming tax season," he said. "There is a lot of interest in reviewing documents on screen, in using Adobe Acrobat and PDF files more extensively, and in looking at workflow and process improvements to enhance their ability to do more work with less people."
"The reason," he said, "is that all firms are facing a people resource challenge, and are trying to leverage technology to help manage it. As a result, they're taking document management beyond just storage and retrieval, and trying to improve their workflow by sharing work and moving it around quickly regardless of location."
Montour, who also has a tax preparation office in the Mohawk tribal territory of Akwesasne bordering the United States and Canada, said that she learned through experience to take particular care in entering bank account numbers on New York State returns.
"If you enter the wrong bank account number accidentally and it's a valid bank account number, it will go through to the wrong account," she said. "It wouldn't happen on a federal return because the IRS matches returns with Social Security numbers, but New York does not."
Last year it cost Montour $1,500 for entering one wrong digit. "We know who got the money, but she already spent it and is really poor - and she won't pay it back," she said.
"The other change for preparers is the new six-month automatic extension," she said. "In past years, taxpayers who requested the first extension went ahead and requested a second extension anyway. It makes sense to allow them the whole period with one request."
New procedures announced in November replace the existing two-step process under which noncorporate taxpayers could only get a six-month extension by first obtaining an extension for part of that period and then requesting a discretionary extension for the remainder. For the 2006 tax season, six-month filing extensions are available for most common individual and business returns.
Sam Smith, a Fiducial franchisee with offices in Middletown, Md., normally hires additional staff at this time of year.
"We typically hire staff before tax season to assist in getting mailing out," he said. "We're more geared to business returns - when January 1 hits, we have a ton of W-2s and 1099s and payroll to get out."
"The IRS is starting to crack down if you don't file your 1099s on time," explained Smith. "With government systems becoming increasingly integrated, and the IRS exchanging information with the states and unemployment and workmen's compensation, they're able to check a lot more items."
"A few of our clients actually fill out the organizers we send them," said Smith. "But even if they don't fill them out, it gives them an idea of what they need to bring to the interview."
"Many of our clients are construction companies, and our office is located near four states," he added. "Construction companies cross state lines regularly and tell me about it later, so it's important they can identify where they made their income. The organizers alert them to that fact - they know what they need to bring in."
"We won't have a good season unless our clients are aware of what's going on," he said. "So we keep them informed during the year."
Smith said that he pre-schedules all his clients. "We're doing the scheduling now. We schedule our old clients to the same time frame as they historically came in, and the new ones are programmed in when we talk about year-end planning."
Larry Recor, an accountant with three offices in the Utica, N.Y., area, does not pre-schedule his clients. "We ran some surveys and found very little interest in it, for whatever reason - I know that some offices do it and are successful," he said.
"We're sending out our usual year-end tax planning reminders, and they always create a flurry of activity among the people who have forgotten about tax planning," he said.
But Recor finds little interest in tax organizers: "Out of 1,700 1040 clients, about two people were interested."
Recor expects a particularly busy year. "We added 30 or 40 new corporations since last tax season," he said. "Some of our small business persons retire, so we have a continual direct-mail program during the year. Some are new businesses just being formed, and we send material to industries in which we have special expertise, such as restaurants."
