Tax Practice of the Future: Lead with Tax Planning

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Once your firm has aligned on a compelling vision, the next step in your transformation journey is to update your services to lead with benefits that your clients value. Most traditional, multi-service firms spend most of their time, and derive most of their revenue, from tax preparation, write-up, clean up, and other compliance work. A firm owner with more than a thousand clients recently said, “if the government stopped requiring tax returns, I would have no clients and no business, because clients would not see a reason for my services.” That’s a sobering revelation that applies to most traditional firms.

Tax preparation is required, but not desired. Conversely, tax planning that communicates meaningful tax savings is valued by clients. Instead of being content as a forced expense on the client P&L, leading firms have updated their offering to communicate what is important to clients, rather than what is required. They still deliver tax preparation and compliance work, but de-prioritizing the communication and importance of it.  Including tax planning in every engagement creates competitive differentiation from the tax preparer masses. The beautiful thing about leading with tax planning with every client, is that it opens the door to additional advisory services that help power prosperity for clients, delivering the growth and purpose that many traditional firms have found elusive.

Below is a framework to update your services, increase your value to clients and grow your firm revenue. This change to lead with tax planning is integral with the other steps in the transformation process (create an advisory workflow and deliver bundled services), which are covered in other articles.

  • Lead with tax planning.  Instead of leading with tax preparation and making planning optional, make planning the entree that is included with every bundled service package.  The depth of tax planning will change across your three bundled service packages, but each client package includes at least one annual tax planning meeting and basic plan. How you message the change is important, but increase your fees on the basic bundle by at least 25% over prior fees, and the next two service bundles would be significantly higher. Next, design your tax planning process for efficiency without burdening clients for planning information. Instead of using paper organizers, which are a terrible client experience, focus more on the conversation. Use a linked calendar application so clients can self-schedule appointments. Lean into phone and video meetings to save clients and staff time. For clients in bundle two and three, plan on more frequent conversations.
  • Standardize your tax strategies.  Start with a checklist to standardize tax planning strategies. As you employ certain strategies more frequently, consider creating a one-pager describing the background and strategy for clients. For some strategies, an onboarding video might be helpful to scale the strategy across a wider base of clients. For example, when changing clients from a sole proprietor to an S-Corporation to reduce self-employment, there are multiple steps that should take place, as well as new processes the business will employ to operate as a corporation paying W2 wages to the owner and possibly AAA distributions. An onboarding video that explains all these steps can help clients feel more confident about the change, better understand the tax savings behind the strategy, and make it easier for your firm to implement the same strategy across many clients. 
  • Document client goals.  Everyone has dreams and goals for their career, business, family, education, savings, retirement and lifestyle. As an advisor, the first step is understanding what is important to your clients and documenting it. When interviewing both spouses, simply asking questions will likely uncover shared goals, as well as opportunities to reconcile goals for spouses who may not be on the same page. Once you understand the client goals, you can create a living tax plan that you update periodically with new information and as you collectively take action. Some tax saving strategies may include reviewing the benefit plans of your client’s employer, while others may be more self-directed.
  • Track tax savings by strategy.  Tax planner programs usually summarize complex tax calculations to precisely deliver an accurate tax calculation, and maybe compare two or three scenarios. In many cases, this is little more than estimate adjustment so the taxpayer isn’t surprised with a balance due. The inverse of this process is actually calculating the tax savings of every action you take to help the client minimize their liability.  Tax professionals do this naturally as part of the process, but almost never communicate it to clients. By dis-assembling your tax planning into discrete strategies, you have more tools at your disposal to save clients’ money. Rarely do clients take every action at once to minimize taxes, and by tracking discrete strategies and updating the plan periodically, you reinforce the value of tax planning and savings, and de-emphasize the value of the tax preparation, which is more of a reconciliation at year end. 
  • Communicate tax savings. Armed with tax savings by strategy, now you can communicate the value of your tax planning and tax savings to clients. Clients view tax preparation fees as an expense, and everyone wants to minimize expenses. When you communicate savings from tax planning services, they view your fee as an investment, with a clear return on that investment. Some firms go further and track savings annually and cumulatively, and publish their savings on their website. Prospects shopping for a professional are more likely to select a firm that demonstrates tax savings than one that leads with tax preparation.  
  • And advisory. The tax planning interview naturally leans into proactive, forward looking services to help families and clients achieve their goals. A recent Intuit study found 32% of small businesses are unable to either pay vendors, loan payments, pay themselves or employees due to cash flow issues.  Cash flow advisory is just the first opportunity where you can lean in to help power prosperity with clients. When clients see you help them grow their business and improve cash flow and automate tedious work, they view you as an integral partner to their business.

This Tax Planning Checklist for business clients is an example of how you can standardize tax strategies, quantify the tax savings impact, and track savings by client. The checklist includes a tab to track client goals, which creates a launching point for more advisory services to help clients achieve their goals. Customize the checklist with additional tax strategies to fit your practice and your clients.  

In the next installment, we’ll examine how leading firms create an advisory workflow to proactively deliver tax planning and advisory services without burdening clients.

Author Bio: Jim Buffington is a CPA and leads the ProConnect Customer Council, supports Intuit’s E-file Security initiatives, and acts as the Customer Liaison for Intuit ProConnect, where he learns best practices from leading firms to share with the profession. Before joining Intuit, he was in public practice for a dozen years as a partner in an East Texas firm preparing oil & gas tax returns. Jim used Lacerte & QuickBooks software in practice, and loves improving processes and technology to drive productivity and better client experiences. Jim’s passion is helping Tax & Accounting Professionals lead with planning and advisory services to help power prosperity for businesses & families. You can find him teaching Tax Pro courses or in TaxProTalk, a video series for ProConnect customers. Jim is an Aggie, he has been with Intuit ProConnect for 17 years. Connect with him on Twitter @jimatintuit