5 tips for better tax planning

Tax reform presents an opportunity to increase your value as a trusted advisor for your clients through proactive tax planning. In a recent survey, more than 70 percent of Intuit® ProConnect™ tax professionals said they plan to perform tax planning services for at least half of their clients in 2018 – a significant increase over prior year tax planning engagements.

When we asked tax professionals how they define “tax planning,” we found a wide range of definitions, ranging from updating W-4 withholding and estimates based on prior year amounts, to complex multi-year plans with formal reports. To clarify and differentiate, “withholding checkups” confirm taxpayers have enough taxes withheld to cover safe harbor liabilities, while “tax planning” involves implementing specific tax strategies to minimize taxes.

Withholding checkups are usually part of the tax preparation process, and most firms are not charging additional fees for the service. Tax planning, on the other hand, is typically a periodic engagement for 15 to 20 percent of clients. Traditionally, the tax planning process involves collecting lots of data to forecast income. The output is often a detailed report with substantial fees charged.

Leading firms are changing the traditional tax planning model by using cloud applications to continuously engage with clients and conduct regular business reviews. Firms using QuickBooks® Online Accountant for client accounting have an efficient tax planning platform to project income and recommend tax savings strategies, without nagging the client for data or upselling a planning engagement. Most of these firms have also shifted their fee model to charge fixed monthly fees that bundle preparation, planning, business reviews and other services. Feedback from these leading firms indicate clients appreciate review insights and fixed fees they can budget.

Tyler McBroom, CPA, owner of Measured Results, says, “We learned the clients we had on QuickBooks Online, we were servicing more effectively and were spending far less time on tedious stuff like back and forth with different versions.” The firm has since moved more than 90 percent of its business clients to QuickBooks Online.

McBroom’s mission is to help clients pay as little tax as legally possible, while providing proactive tax planning using data from QuickBooks Online. “We can give them feedback in real time,” he says. “It has not only increased our efficiencies, but has helped us serve our clients better, and that has been awesome for the firm.” While the learning curve is challenging for professionals who love QuickBooks desktop, the productivity gains are huge. McBroom says, “The results speak for themselves. In each of the last two tax seasons, we grew over 50 percent.”

When we asked tax professionals when they planned to start tax planning, many replied they were focused on learning as much as possible about tax reform before engaging clients. Some were concerned about ambiguity in certain parts of the code. It appears unlikely we will have a technical corrections bill this year, which means we have to navigate with some ambiguity. Rather than waiting for perfect clarity, preparers should begin implementing some strategies and proceed conservatively in areas that are not clear yet.

Here are five helpful recommendations for your tax planning process:

1. Be the therapist. We often hear tax professionals say they feel like a therapist, helping clients work through their problems – financial and otherwise. Tax planning begins with listening. Don’t over-prepare with planned strategies as you meet with clients. Instead, have a list of questions to understand the clients’ goals and objectives. Use an organizer or template to capture client data. Focus first on educating clients about changes and potential tax saving options. Later, you can turn those goals into short- and long-term action plans that lead to tax savings.
2. Standardize your strategies. Create a list of tax strategies you can standardize and implement with broad segments of your client base. Tax reform primarily benefits business owners, but there are still plenty of planning opportunities for non-business clients. In addition, name your strategies so staff and clients learn faster. For instance, a “meals and entertainment review” might include creating new general ledger accounts to separate non-deductible entertainment from deductible meals, and educating clients about classifying expenses to facilitate the tax preparation. Or, a “qualified business income (QBI) review” might include reviewing multiple factors such as business activities, services and wages paid to determine eligibility for the 199A QBI deduction.
3. Put it in writing. Quantify the planned savings of your tax strategies for each client. Use tax savings instead of tax preparation as your value proposition with clients and prospects. Clients are more willing to pay higher fees when they clearly see value, but clients and practitioners tend to minimize fees when they perceive tax preparation is a commodity. Planning and documentation helps drive accountability and hold clients to reasonable goals and expectations. In the long run, accountability can help owners realize their goals and prosper. Clients appreciate one-page summaries that clearly define the tax strategy and savings. Leading firms track cumulative savings and boast about real tax savings on their websites.
4. Scale your services. Use video conferencing to scale your services and save time. It’s easier to create recurring meetings that are time bound with calendared video meetings than appointments that can be upended by traffic and other productivity killers. Some of our customers who had a great tax season said that implementing video meetings to review the tax returns on screen was a huge part of their productivity improvement. Applications like Webex, Zoom and GotoMeeting have become staples of the business world and demonstrate to your clients you understand how to use technology. You can also record web meetings and use them at a later time for reference and training.
5. Make planning and accountability continuous. Reports with recommendations that are never implemented are not helpful. Clients need help implementing tax strategies and being held accountable to goals. Leading firms leverage QuickBooks Online to engage with clients, and help with budgeting, forecasting and regular business reviews. If your firm is still swapping data files and nagging clients for information, tax reform creates an opportunity to upgrade clients to QuickBooks Online to automate much of the data entry and increase your value as a trusted advisor. Tax reform will evolve over years, and it’s important to set the right expectations with clients. Clients appreciate proactive advisors who stay involved. Continuous planning also flattens the spikes in your workflow and avoids non-value work that kills productivity.

If you liked this article, share this tip on social media: #TaxReform gives #TaxPros a unique opportunity to lead with tax planning services and add more value for clients.