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Tax Planning Complexity Can Provide Growth for Your Firm

The increased complexity of individual taxation and the overall personal finance environment is leading many CPA firms to explore ways to address areas where tax planning overlaps with retirement planning, estate planning and other personal finance areas.  This approach delivers great value, creates new firm revenues and increases competitiveness.

As Barry Melancon, AICPA president and CEO recently noted in a video to AICPA members, the need for tax planning that integrates personal finance concerns is critical. Clients have many questions about how the American Taxpayer Relief Act of 2012 and the new Medicare surtax affect them, in particular. The retirement savings crisis is getting national media attention and threatens the financial security of Americans.  Post-ATRA, the estate tax may affect only a small number of clients, lessening the focus on planning to reduce taxes and refocusing estate planning on its primary purpose, which is protecting  loved ones through asset protection, asset titling, beneficiary designations and more.

This is an important time for CPA firms to rise to the challenges clients face. The new complexity of tax planning intertwined with personal finance requires CPAs to take a deep look at clients’ balance sheets.  The possibility of a 20% capital gain rate, along with the 3.8% surtax on net investment income, calls for planners to carefully consider which assets to keep in tax-deferred, tax-free and taxable vehicles.  For example, Roth conversions, life insurance, annuities and charitable remainder trusts are tools that can help smooth out income and keep clients in lower tax brackets.  Of course, the appropriateness of any tax planning strategy should be determined with the client’s overall financial planning context in mind. Find out more from two webcasts on planning for the 3.8% Medicare surtax and overall 2013 planning considerations, including planning post ATRA and the Medicare surtax.

The most punitive provisions of ATRA affect single taxpayers with taxable income over $400,000 ($450,000 for MFJ taxpayers), but other taxpayers will also pay significantly higher taxes on occasional transactions like the sale of a property or business.  Therefore, all clients’ balance sheet should be scrutinized for unrealized gains to formulate tax strategies relevant to the expected use of the assets.  Knowing how much clients have in tax-deferred accounts will avoid RMD surprises and missed tax-planning opportunities once the client reaches 70 ½.  For example, earlier distributions or Roth conversions might be relevant.  A podcast covering key 2013 planning considerations under ATRA is available from the Personal Financial Planning Section.

The greater tax and financial planning concerns on clients’ minds call for CPAs to uphold their commitment to helping clients make sense of a changing and complex financial environment.  Clients count on CPAs’ integrity and objectivity to guide them through these difficult times.  Fortunately, the profession is ready with resources for all CPAs to lead clients in the right direction.     

Since the creation of the AICPA PFP Section 27 years ago, AICPA staff, volunteer practitioners and other experts have gathered the resources necessary for members to provide advice that addresses both complex personal tax and financial planning concerns. In addition to such resources, the Personal Financial Planning Section provides pathways to expand tax planning services in some or all financial planning areas. CPAs who meet the education, exam and experience requirements can earn the Personal Financial Specialist credential, exclusive to CPAs.

Jean-Luc Bourdon, CPA/PFS, Principal, BrightPath Wealth Planning. Jean-Luc serves on the AICPA Personal Financial Specialist Credential Committee and on CalCPA’s Personal Financial Planning Committee.

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