CPA Practice Advisor

NOV 2011

Today's Technology for Tomorrow's Firm.

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Reviews For Your Firm TAX PLANNING REVIEW SECTIONS BASIC SYSTEM FUNCTIONS • General navigation/ease-of-use • Multiple concurrent users • Multi-client management/setup • System customization CORE TAX PLANNING FEATURES • Years of projections/planning/ prior year • Scenario comparisons • Special: MFS-MFJ, Estimates, Lump Sum, AMT, ACG • State planning support (resident & non-resident) REPORTING • Customizable reporting • Client-ready communication/ reporting • Report output options • Portal/DMS/email integration IMPORT/EXPORT/ INTEGRATION • Data import capabilities • Integration w/tax applications • Tax law research options • Export to common fi le formats HELP/SUPPORT • Built-in support features • OS compatibility • Support website/documentation • Live Support SUMMARY & PRICING The Artistic Side of Tax Compliance: Planning T Isaac M. O'Bannon, Technology Editor 8 November 2011 • www.CPAPracticeAdvisor.com he U.S. tax code is complex. That's obvi- ously not a secret. And in the nearly 100 years since the permanent institution of the national individual income tax, it has grown ever more so, with seemingly endless add-ons and patches, credits and deductions. As for many of our tax and accounting professional readers, whether you are personally a propo- nent of a major rewriting of the code, a fl at tax or some other variation, the truth, for bet er or worse, is that it is currently still a confusing process for most individuals. For professionals trained in the rules, logic and math of taxation, however, it is a skilled exercise that investigates facts and arrives at a generally solid conclusion, hopefully backed by reliable data and founded in the principles and precedent-based interpretations of IRC. Tax experts can also be artists, however, since the creative and questioning mind is an integral part of the tax planning pro- cess. Perhaps tax planning is better described as two parts science, with one part art/creativity. T e base is still in a solid understanding of the current tax code, as well as what that will look like in the future. Add variables that can be controlled over time, and that's the key to the final part: the question, "What if?" Different clients will have diff erent potential "what ifs" from which to build plans, but the point is to identify the best possible outcome. And this is usually to lower tax liability and/or avoid underpayment penalties, based on the known components. Common variables include antici- pating future changes in income, fi ling status, capital gains realizations, and fund distributions. How will taking certain actions now affect an indi- vidual's tax situation this tax year and in future tax years, as compared to making those actions in future years, or when possible, spreading income over multiple years. With the frequency of signifi cant changes to the tax code (which lately seems to occur every year), it's critical for taxpayers, particularly those with moderate or greater investment activity or complex income, to seek professional guidance in return preparation as well as in a proactive plan that anticipates possible taxation issues. Keeping up with the constantly evolving code is also a challenge for professionals, but one for which there are solutions. Tax research systems are one of the core resources, but the addition of a specialized tax planning system is the most eff ective way to off er clients a service from which they can realize tangible value. "See Bob, this is how you're going to save $X,XXX over the next Y years." Most of the major tax programs offer plan- ning modules, and stand-alone planning systems off er integration with mul- tiple tax systems. T ese solutions vary in capabilities, with some designed to meet the needs of the most complex taxpayers and others best suited to producing quick basic plans. All allow for multi-year scenario testing and incorporate the latest tax laws, limita- tions and pending changes. T is allows the professional and their clients to determine best- and worst- case eff ects, and helps them to take steps to avoid potential dangers or optimize deductions and credits. As with weather forecasting, tax planning isn't going to be perfectly accurate every time due to the likely changes in the tax code, par- ticularly for longer-range, multi-year plans. A well-trained professional, however, armed with the science of tax knowledge and a creative, scenario- driven mind, can off er clients bet er predictions than meteorologists. For clients, that's more money in their bank instead of the IRS' coff ers, and for the fi rm, it's a strengthened client relation- ship. And that's a Win-Win!.●

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