This Tax season is getting started with the annual goat rodeo of collecting and reviewing client data. You have probably already mailed, emailed, called, and reminded your clients that “it’s that time again.” Well, so that you won’t sound like a dentist (as in, “this won’t hurt too much”), make this a more cheerful experience by asking your clients about their activities that may qualify for tax credits (click here for the Alpharesults Tax Credit Summary).
You have probably heard your clients say they don’t want any more projects because they are too busy. We see many businesses where the equity owners want the tax credits, but their administrative team has other priorities (and there is nothing in it for them personally). Here are a few points that could help when you talk with your clients:
We recently helped a 16-employee physician practice get a credit of over $17,000 for their new EMR software. The practice manger said she spent about 1 hour over the entire duration of the project. Her value added was over $17,000. How many projects can provide hard ROI of $17,000/hour net-after-tax cost savings to a business?
Your clients need your help to see the bigger picture of tax credit benefits and to understand that priorities may need to be temporarily changed.
2008 and 2010 are almost gone for amending tax returns for the Retraining and Job tax credits.
Year-end planning for your clients (and prospective clients) is a great time to discuss these prior year opportunities.
You will want to include a review of the following for 2008 and 2010:
This is a quick way to strengthen your business advisory role with your clients. If you find tax credit potential $$, your client will thank you for the nice $$ check they receive from DOR!
November 4, 2011 – Georgia Medical Group Management Association (MGMA) 2011 Governmental/Third Party Payer Forum. Stop by our booth (Click here).
November 18, 2011 – Institute for Professionals in Taxation (IPT) Georgia One-Day Tax Seminar. This will be a great session to hear the new DOR commissioner and talk with DOR policy folks. Hope to see you there. (to download brochure click here).
We have been reading an interesting book by Andy Kessler called Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs (get it here). Kessler introduces several fascinating new ways for businesses to think in today’s economy.
One of his 12 key rules is “When in Doubt, Get Horizontal.” The old-line vertically integrated business (in your case, the “full service accounting firm”) model is dying. If there is something you do really well, why not sell, sub-contract, re-package, or outsource it to others??? Then let somebody else worry about the infrastructure, billable hours, collections and other headaches that don’t bring in revenue. Your horizontal offering can now be sold everywhere.
Here is an example I frequently see: professional services corporations (PC or PA) that are C-corporations, such as physician practices. They can’t utilize the Georgia Retraining Tax Credit since they pay limited Georgia income taxes.
Well, I went out and found a CPA firm with the expertise to help these practices convert from a C-corporation to an S-corporation, and it has a great ROI (won’t bore you with details here). Unfortunately, I can’t introduce this CPA firm to a client of another CPA firm without causing trouble, if you know what I mean! But, if this were a separate, self-contained offering, then other CPA firms might well want to bring it to their clients who need it. This same concept could potentially be leveraged nationally.
What capabilities do YOU have sitting on your “full service” bench that could bring in more revenue? Think horizontal, not vertical to bring in more revenue!
We have heard many CPAs and other accounting practitioners mention potential Errors & Omissions (E&O) insurance claims from their clients if tax credits have been overlooked. We talked with Cherie Tolbert, Vice President with Crow Friedman Group, LLC (click here). Cherie’s firm specializes in providing risk management services and insurance products to CPAs and other professionals. They are experts in this area — here is an overview of what she had to say:
To reduce the risk of E&O claims for tax credits, Crow Friedman Group recommends the following:
One final note, even if the firm feels they might have missed the credits for the client, they should consider bringing this up with the client. Continuing not to discuss possible eligible credits can only perpetuate a potential problem.
This information is not meant to give individual advice on how to prevent a claim. Accounting practitioners look to their own professional liability provider for advice and guidance according to their own individual insurance coverage.
| We are hearing that things are picking up in some areas of Georgia’s economy. This is based on our informal survey of clients, CPAs, bankers and other business advisors.
Indicators include employees are working overtime, temps are being added, and investments are being made. As your clients are making these decisions, try to give them advance notice of the potential tax credits they could realize. You want to make sure they do at least the minimum so they can utilize these incentives. For example:
Ask to participate in their planning meetings and talk with their business advisors to make sure you are included.
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This comes in handy when I meet with companies that are starting up, relocating to Georgia, or having significant growth. They are looking for business advisers, often from CPA firms, who can help them. Knowing your ideal client helps me refer the best adviser for the job.
Suggestion: clearly define your ideal client so that your network of business advisors can help (such as bankers, attorneys, insurance agents, tax credit consultants and others). If it’s easy to remember, hopefully they will bring you opportunities for new business.
Now that tax season is here, the fun begins. Clients are probably dumping their tax documents (electronically and physically) at your office and asking when their tax returns will be completed. As you dig through all of the details, you discover some changes the client forgot to mention that will impact their taxes.
We had a similar situation recently. The client’s tax structure changed – they converted from a C corporation to an ESOP (100% S corporation), so they no longer pay income taxes. The client didn’t tell us about this change. Meanwhile, the client spent time and resources to collect their state tax credit documentation. As usual, we helped them get the tax credit certification and delivered it to their CPA. The CPA didn’t know what was going on since he had already talked with the client about the change. The client forgot that paying no taxes meant that they could not use tax credits.
If your clients have utilized tax credits in the past, you need to help them understand (and beg for no surprises!) their potential to utilize the tax credits in the future. Major changes in tax (such as tax structure, future NOLs, equity ownership and other items) can have a major impact on the ability to use tax credits (and save your client time and resources).
An unfortunate part of business success is having an income tax liability. And despite your best efforts of tax planning and advice, your clients may still have to pay taxes. But that’s good, because tax liability is an indication of revenues, profits and business success, right?
We heard an interesting story about a a highly successful multi-million dollar a year business owned by a man with an eighth grade education. One of our friends heard him say, “I just love to pay taxes.”
The business owner went on to explain that he was perfectly happy to pay his obligations, because he knew he had already done everything he could legally and morally to keep his tax payments to a minimum.
Got any clients like that? Maybe not very many, but your year-end and 2011 tax planning is a great time to discuss opportunities to reduce taxes with all of your clients.
Some ideas to explore with your clients include:
Get your clients talking about their business (including prior years and plans for the future). There may be hidden gems of potential tax $$ savings that you can uncover for your clients!
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