what to do now … before the big rush
ways to help clients prepare
Because clients don’t live and breathe the tax law as CPAs do, they may expect you to inform them of planning opportunities and tax traps. With time at a premium, it’s often difficult to do this during tax season. Take the time now to speak with clients.
Inform clients of significant tax law changes since last tax season. These changes may include guidance related to the Coronavirus Response and Relief Supplemental Appropriations Act, Coronavirus Aid, Relief, and Economic Securities (“CARES”) Act, Families First Coronavirus Response (“FFCRA”) Act, American Rescue Plan Act, the Advanced Child Tax Credit, virtual currency, and the third round of Economic Impact Payments (“EIPs”). Retain a distribution list of such communications (e.g., newsletters), including the dates transmitted, and document that the client was informed of these changes.
Identify clients who have made investments in aggressive tax planning strategies. Include those identified on the IRS Dirty Dozen list, such as syndicated conservation easements and micro-captive insurance companies. Be alert for strategies not yet identified by the IRS. For ideas on what to look for, read the article Avoiding Fallout from Aggressive Tax Strategies. Document research performed and any related client discussions.
Alert clients of other filing obligations,
such as Financial Crimes Enforcement Network (“FinCEN”) Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”) and the consequences of non-compliance.
Consider the impact of remote employees and the South Dakota v. Wayfair, Inc. (“Wayfair”) decision on clients’ businesses. COVID-19 has changed where many people work, potentially creating nexus in new states for clients’ businesses. Risk Alert: “COVID Homes” Create Professional Liability Risk for CPA Firms provides guidance.
Have all clients considered the Wayfair decision? If not, consider leveraging the AICPA’s Wayfair Client Notification Letter to start the discussion. If you believe the decision may affect your clients, schedule a meeting to discuss the impact and follow up in writing to document the discussion.
Contact clients to schedule appointments prior to year-end.
Discuss items affecting their 2021 return. If a tax projection will be prepared or tax consulting will be performed, obtain a separate signed engagement letter for these additional services. Sample tax planning and tax consulting engagement letters are available to CNA policyholders in the Policyholder Resource Center and AICPA Tax Section members in the Annual Tax Compliance Kit. Be specific about the scope of services. For example, “calculate the impact of Internal Revenue Code §163(j) on the company in light of Tax Reform, and, if interest is limited, explore options to increase the deduction” is preferable to stating “explore Tax Reform’s impact on the company.”
Contact clients who have historically procrastinated in providing their tax return information to you. Consider providing incentives to them for early submission. Ideas on how to incentivize clients can be found in the articles How to Deal with Last-Minute Clients and The Early CPA Gets the Return (Done on Time). Provide these clients with a deadline by which all information must be received. If information is not received by the designated date, inform the client that you will be unable to timely complete the return, and an extension request may be necessary.
Have your clients changed their partnership agreements for the Bipartisan Budget Act (BBA) of 2015 Centralized Audit Regime? Partnership returns currently under audit are now subject to these rules. To learn more, review the IRS BBA Centralized Partnership Audit Regime resource.