Tax Advisory
Tax Advisory

5 must-have ways to provide tax advisory services to clients

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Why aren’t more CPAs, tax professionals, and trusted advisors performing tax advisory services for their clients, instead of only providing tax compliance services? We frequently hear this question from new clients when we introduce them to tax-saving strategies, such as establishing an accountable plan or renting to their business using the Augusta Rule. While there are several reasons, let’s explore five common ways you can add tax advisory to your practice.

#1: Identify the right set of clients

In general, U.S. tax codes provide incentives for certain taxpayers, such as business owners and real estate investors. The concept for this is simple: The government incentivizes taxpayers to own businesses, which creates jobs and real estate, and provides shelter to the U.S. population. Both reduce the stress load of the government, so as a reward, the government hands out treats in the form of special tax deductions to these groups of taxpayers.

You may ask, “Aren’t there tax strategies that benefit non-business owners and non-real estate investors?” Yes, of course, but most tax strategies revolve around business and real estate ownership. 

Taxpayers who own businesses and real estate investments are great candidates for tax-saving strategies. Tax advisory options become limited if your client base lacks these groups. Therefore, CPAs and advisors should proactively market to these specific taxpayers to grow their tax advisory practice.

#2: Keep aware of all tax legislation

The U.S. tax codes can be voluminous and complex. They are not always clear-cut and, at times, require interpretation, and then an interpretation of the interpretation. Furthermore, tax court rulings sometimes contradict rulings from previous tax court cases. 

Keeping abreast of tax legislation requires continuous education beyond the minimum mandatory CPE requirements. For starters, a profession-related journal magazine or newsletter subscription is a must have. And joining peer groups for accountants and advisors on Facebook and other social media channels is an excellent way to stay current on tax legislation and general industry trends.

Dedication and commitment to continuous learning are requirements for a successful, trusted tax advisor. It’s an investment we must make to be effective. After all, we are in the business of selling our knowledge, which is expected to be up to date.

#3: Avoid a laborious manual process

For decades, devising tax plans required manual calculations to reflect various tax scenarios and projections, as well as researching multiple mediums to determine the most suitable tax strategies. All of these efforts are undoubtedly labor intensive. 

However, with Intuit® ProConnect™ Tax and tax planning software, dozens of tax strategies are centralized and available at your fingertips. Technology makes tax advisory efficient, so devising tax plans no longer takes up valuable time.

Pro tip: Regardless of technology, there is no substitute for having an in-depth understanding of tax-saving strategies and exercising creativity, while staying in lawful confinement.

#4: Make your clients aware of what you offer

Many clients do not realize they can control their tax liability by implementing various tax strategies, such as deferring income taxes and shifting income to a lower tax bracket entity—whether they’re a person, child, or business entity. Taxpayers have been conditioned to pay their taxes throughout the year, and hope for a refund or low tax bill when they file their tax returns. 

Even preparing a tax projection before the end of the year to estimate what their tax bill will be at tax time is a foreign concept to many taxpayers. At the very least, providing tax projection services throughout the year is beneficial to clients because it alleviates surprises—which are usually suitable for birthday parties, but not at tax time.

This simple advisory service is underutilized, but the taxpayers are not to blame for their lack of awareness. As tax professionals, it is our job to market and promote the value of our services. Clients should not have to ask their CPAs and tax pros for tax savings advice. We must be initiative-taking and sincerely interested in our clients’ financial well-being.

If CPAs and trusted advisors can demonstrate clear and convincing tax-saving concepts to clients, there are not many reasons why clients would not choose tax advisory services. 

#5: Maintain your mindset—it works!

Preparing tax returns to comply with filing and reporting requirements does not add value to clients. Moreover, tax preparation services have become commoditized, and tax preparers must now compete on price. This is not a sustainable business model for our profession. 

Large tax preparation companies have recently begun offering free tax preparation services. How do you compete with free? You don’t. Period.

The mindset must then switch to providing value to clients while being adequately compensated for it.

Tax advisory service fees are based on the value provided, instead of the time it takes to develop a tax plan. A tax plan that takes 45 minutes to design could be priced considerably, based on the tax savings and value it brings to the client. Yes, it may only take 45 minutes to develop a tax plan, but it may have taken 45 days, weeks, or months to master the concepts and develop the required skills to deliver a solid tax plan.

We must know the worth and value that we bring to the table. Building this mindset requires confidence and is necessary for tax advisors who do not want to be viewed as a commodity.

What are you waiting for?

If you want to grow your practice and provide your clients the kind of services they need to grow their businesses and enhance their lives, adding tax advisory services to your practice is the right thing to do. Sure, it’s fine to be satisfied with tax compliance—and that model works well for many tax pros. However, never has a client said, “You’re giving me too much great information that I’m going to ignore.”

Go the extra mile and demonstrate your skills as your clients’ trusted advisor. It’s a win-win for everyone.

2 responses to “5 must-have ways to provide tax advisory services to clients”

  1. What are your techniques to convince your reluctant clients to pay for tax planning?

    • Hi Nayarit – thanks for your question. Here is what I recommend:

      First, educate the client that your tax advisory fees are an investment, not an expense. You can accomplish this by presenting the return on investment to the client based on the advisory fees and the tax savings you’ve demonstrated. A good return on investment is about 300%. If you can show such a return, clients would be less reluctant to obtain tax advisory services.

      Second, in your proposal of the overall tax savings, include case studies of similar clients that you helped with tax savings.

      Third, start slowly by offering less expensive tax advisory services, e.g., performing quarterly tax projections, so the client can experience the overall benefit of proactive tax planning. Afterward, you can increase service offerings to include full tax strategy services.

      Fourth, offer a guarantee so that they have peace of mind since the client is making a significant investment.

      Good luck!