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Rick Telberg
Rick Telberg
 

Ten Reasons to Hate Tax Season

And seven ways to learn to love it instead. How’s YOUR tax season so far? Join the survey, compare results with your peers.

February 9, 2009
by Rick Telberg/At Large

Tax professionals may be embarking on one of their busiest busy seasons in memory, fraught with a rapidly-sinking economy, traumatized clients and a turbulent tax and regulatory environment.

From my experience, the most important thing CPAs can do at this time is to be there to hold their client’s hand, gain a full understanding of their goals and anxieties and plot new strategies together.

HOW’S YOUR BUSY SEASON?

Join the survey; compare results with your peers.

(Free. Confidential.)

“Be proactive in letting clients know that you are aware of the market turmoil, and share their concerns,” says William Reichenstein, a finance professor at Baylor University who was at last month’s AICPA Advanced Personal Financial Planning conference. From an investment perspective, Reichenstein urges clients to stay in the market. “If they can tolerate the thought, I think now is a wonderful time to rebalance back to their strategic stock allocation,” he says. “This likely means selling bonds and buying stocks.”

As someone said about the guillotine, there’s nothing like tax season to focus the mind. At no other time in the year, do CPAs have as much of the client’s attention. That’s why I call it “opportunity season.”

But counseling clients may not be at the top of CPAs’ minds as they swing into tax season.

If there’s a lot on your mind, you’re not alone. There are at least 10 other issues vexing professionals this year, according to James Reeves, senior vice president of New Product Development at the Tax & Accounting business of Thomson Reuters.

How many of these are you ready for?

  1. Revised Form 990;
  2. Estate tax legislation;
  3. Federal income tax legislation as a significant component of the economic stimulus package;
  4. AMT scheduled to affect 33 million taxpayers in 2010;
  5. Over 30 tax provisions scheduled to expire in 2009;
  6. President Obama’s campaign promises of tax increases on individuals with income exceeding $250,000, creating a potential marginal tax rate exceeding 60 percent when you consider:
    • A marginal income tax rate of 39.6 percent,
    • A 20 percent tax rate on long-term capital gains and dividends,
    • A combined employee and employer Social Security tax raised by two-percent-to-four-percent for families (not individuals) earning over $250,000,
    • A return of the phase-out levels for itemized deductions and personal exemptions back to their levels under President Clinton and
    • State income taxes for most Americans.
  1. Congressional attack on the current 401(k) system;
  2. Tax aspects of bankruptcy, liquidations, debt restructuring;
  3. Many state budgets facing shortfalls; and
  4. New preparer and disclosure rules like Reg 7216 that raise the stakes for tax return preparers and advisors.

That’s a lot to worry about. But the best way to deal with it is to focus on clients, one client at a time.

In light of all the changes and uncertainties, CPAs will be spending a lot of time managing client expectations and “client fears,” says Ellen Bruno of Compliance Advisors, which counsels CPAs on financial planning services. Practitioners need to help them stay focused on long-term goals and not modify them because of short-term issues, “to spend on needs not wants, and postpone, if possible, major withdrawals,” she says.

Mark Tibergian, CEO of Pershing Advisor Solutions LLC and an expert on CPA firms, offers this punch list:

  1. Over-communicate.

  2. Listen.
  3. Work with clients to develop and agree on a set of assumptions for them and markets about near- and long-term so recommendations are made in context.
  4. Don't respond like a wonk when clients are emotional. Instead, be empathetic, acknowledge their fears and concerns.
  5. Don't pretend to know all the answers.
  6. Focus on the now and near future.
  7. Be sure to remind clients of their plan and how you together will help them get back on track.

These are the times when CPAs really earn their keep, according to Gary Carrai, senior managing director at Fortigent LLC, a financial services firm catering to CPAs. “CPAs should combine all of the knowledge about a particular client and be active in meeting and planning with clients rather than waiting for clients to reach their own conclusions,” he says. “Communication in any environment is important, but in times like these it is critical.”

JOIN THE SURVEY: How’s YOUR tax season so far? Join the survey, compare results with your peers.

COMMENTS: Rants, raves, ideas or questions? Contact Rick Telberg.

Copyright © 2009 CPA Trendlines/BSG LLC. All Rights Reserved. Used by Permission. First published by the AICPA.

About Rick Telberg

Rick Telberg is editor at large/director of online content.

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Disclaimer: Any views expressed in this article do not necessarily reflect the views of the AICPA or CPA2Biz. Official AICPA positions are determined through certain specific committee procedures, due process and deliberation.