Tom Talks Taxes - August 27, 2021

Four tax software programs you should consider for your practice

The modern 21st century tax practice has technology and automation at its core.

There are hundreds of software programs that can make a difference in your business. For example, there are programs that help you automate processes, enhance productivity, or manage client relationships.

I’m not going to talk about these types of programs in this edition. Instead, I want to focus on programs that directly impact the tax portion of your business.

If you only use tax preparation software plus Microsoft Office to handle technical tax issues — keep reading.

Below are four programs that I find invaluable and how I use them in my tax practice.

TaxInterest ($99 per license per year)

No matter what type of tax practice you have, you need TaxInterest. It is the most accurate calculator for IRS interest and penalties (and some states as well). For example, I can provide an extremely accurate pay-off calculation for a client, or I can project a non-filer’s total unpaid tax owed to plan collection alternatives. I can also use the program to verify the IRS’s account transcript information, or determine the impact of tax return adjustments on interest and penalty accruals.

This program allows me to communicate with my clients with precision on the overall impacts of various tax actions and options. Interest is a significant, but often overlooked, cost to the client in IRS issues. Being able to quantify IRS interest savings increases the value I can demonstrate to the client when value pricing an engagement, as an example.

RCReports (Starter plan starts at $299 per quarter)

You cannot do high-level tax planning for business owners without RCReports. Period.

If you aren’t working with your corporation clients to regularly assess shareholder wages to avoid overpayment of payroll taxes, then they are quite possibly paying thousands in excess payroll taxes each and every year.

RCReports allows you to determine appropriate reasonable compensation for business owners using IRS and Tax Court approved methodologies in conjunction with robust Bureau of Labor Statistics (BLS) data sets.

Here’s a quick example: your client is a 100% owner of a S corporation paying herself $400,000 a year in salary. Let’s assume you do a salary study with RCReports and determine appropriate reasonable compensation is $150,000. By reducing her salary $250,000, assume she saves 3.8% in Medicare and Additional Medicare Tax on that amount, or $9,500 per year. In addition, you increase the S corporation pass-through by $250,000 - meaning the potential §199A increase is $50,000 (20% of $250,000). If the value of that deduction is estimated to be $14,000 a year, the total annual savings to the owner is $23,500 per year — solely because you used RCReports.

Could you charge $5,000 to do this tax planning engagement? Absolutely — if you can effectively communicate the value of the tax planning engagement compared to its cost. This type of advanced tax planning work is a not a “tax tip” or a free service.

TaxTools ($199 initial license and $189 annual renewal)

TaxTools is the Swiss army knife of tax programs - there are hundreds of modules for worksheets, flowcharts, or fill-in IRS and state forms. Some examples include:

  • Alimony Recapture worksheet (may it rest in peace),

  • Dependency Exemption flowchart,

  • Form 2848, Power of Attorney and Declaration of Representative,

  • Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals,

  • Installment Sale Income worksheet,

  • Rental Property Setup worksheet, and

  • Sale of Personal Residence Planner worksheet.

When it comes to state forms, TaxTools has a robust inventory of California forms, some New York forms, and power of attorney forms for several other states.

One module I love is the 5 Year Federal/State Tax Planner. It allows me to compare a series of tax return scenarios side-by-side. I have two main uses for it:

  1. Evaluating tax planning options by modeling their effect on one tax year, and

  2. Estimated tax and withholding planning for each quarter of a tax year.

Tax Help Software ($500 per year for Executive version)

The IRS has various transcripts accessible to tax professionals to report taxpayer data. The two most common are the account transcript, which shows all transactions on a taxpayer’s account for a tax year, and the wage and income transcript, which shows all third-party reporting documents submitted to the IRS for a taxpayer for that tax year.

Tax Help Software (THS) allows quick and effortless access to these transcripts for your clients; in addition, it generates reports so you can quickly assess a taxpayer’s overall IRS situation. It also generates the Form 2848 or Form 8821, Tax Information Authorization, you need to access this data.

The IRS often miscalculates the collection statute of limitations end date (CSED). This date is critical when working with taxpayers who have IRS problems. THS generates the best estimates of a taxpayer’s CSED so you can compare it to the IRS’s computation.

You don’t have to do IRS representation to find value in THS - it tracks estimated tax payments and federal tax deposits. For example, let’s say you had a Form 8821 on file for every client: you could easily access economic impact payment amounts and advance child tax credit payment amounts from the IRS account transcript.

There are IRS transcript access programs offered for free or as part of another program suite. Would I use them? No. I use THS.

Inner Circle with Tom

If I offered to show you how to get solutions to your complex tax issues without hours upon hours of frustrating research roadblocks — would it be a bad idea to take me up on that offer?

Or how to get paid premium fees for the good work that you do for your clients?

I have openings for three members into my Inner Circle who are looking for ongoing weekly support and mentorship to help build their business.

Click here to apply for my Inner Circle!

Upcoming Education Events

Compass Tax Educators - Virtual

Ohio Society Of Enrolled Agents - Greater Cleveland Chapter - September 16, 2021 - Strongsville, OH

  • C Corporation Tax Planning (2 CE); Entity Tax Return Preparation (2 CE); Mastering the Tax Research Process (2 CE)

California Society Of Enrolled Agents - Central Coast Chapter - September 22, 2021 - Virtual

  • American Rescue Plan Act of 2021 (3 CE)

Washington State Tax Consultants- September 29 - October 2, 2021 - Anacortes, WA

  • Cryptocurrency Taxation (2 CE); Key Court Cases in the Tax Law (2 CE); Tax Planning Strategies for Business and Rental Owners (2 CE); Mastering the Tax Research Process (4 CE); 2021 Tax Law Changes (4 CE)

  • Sherrill Trovato, EA, USTCP is teaching 8 CE on “Prep to Rep”

Preparing To Practice Before The U.S. Tax Court - November 4 - 6, 2021 - Orange County, CA

AICTP Tax Planning Academy - November 2021 - San Diego, CA

Tax Talk Today - November 16, 2021 - Virtual

  • Ethics (2 CE)

Arizona Society Of Enrolled Agents - Phoenix West Chapter - November 17, 2021 - Virtual

  • Entity Tax Return Preparation (2 CE)

Washington State Society Of Enrolled Agents - January 6 - 7, 2022 - Seattle, WA

  • Federal Tax Update plus additional topics (16 CE)

Michigan Society of Enrolled Agents - January 10, 2022 - Novi, MI

  • Federal Tax Update (8 CE)

CSEA - North Bay Chapter - January 14-15, 2022 - Marin/Sonoma County, CA

  • Federal Tax Update (6 CE); California Tax Update (2 CE)