what to do now … before the big rush
ways to help clients prepare
Because clients don’t live and breathe the tax law like 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.
Explore the impact of the South Dakota v. Wayfair, Inc. (“Wayfair”) decision on client’s businesses.
If you haven’t already done so (and maybe even if you already have), send clients a newsletter discussing the decision. American Institute of Certified Public Accountants (“AICPA”) members may utilize the
Wayfair Client Notification Letter
as a starting point. 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. Remember to discuss the income tax aspects, as many states are using the same nexus standards for other taxes.
Inform clients of significant changes in tax laws,
such as guidance released or enforcement actions taken since last
tax season related to the Tax Cuts and Jobs Act (“Tax Reform”), Coronavirus Aid, Relief, and Economic Securities (CARES) Act, Families First Coronavirus Response (FFCRA) Act, and syndicated conservation easements through client newsletters. Retain a distribution list of such communications, including the dates transmitted documenting that the client was informed of these changes.
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.
Educate clients about the potential tax savings for investments in Qualified Opportunity Zone Funds (“QOZF”).
Taxpayers may be eligible to defer tax through 2026 on capital gains by investing in a QOZF. If the investment is held for a sufficient timeframe, there may be an opportunity for non-taxable gains. The tax law related to QOZFs is complicated, but clients will probably wish to know about this opportunity and may hold their CPA responsible if they are not informed. While any client with capital gains may benefit, clients with significant transactions should be identified for an individualized discussion followed by written documentation.
Contact clients to schedule appointments prior to year-end
to discuss items affecting their 2020 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 policyholders in the
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 “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
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 their return and an extension request may be necessary.
Address clients who have not taken steps due to changes in the partnership audit rules
for partnership tax years beginning after December 31, 2017. Advise clients to consult with their attorneys about revising partnership and limited liability company agreements to address these changes. AICPA Tax Section members may utilize the
Letter to Advise Clients on Partnership Audit Changes
as a starting point. Items that clients, with the assistance of their attorneys, should address in a revised partnership agreement include but are not limited to:
    • Identification of the partnership representative,
    • For eligible partnerships, whether or not to elect out of the revised partnership audit regime,
    • Whether the Internal Revenue Service (“IRS”) may collect any additional tax, interest, and penalties directly from the partnership at the highest individual tax rate or to take adjustments into account from the partners in the reviewed year,
    • Identify the decision-maker for new elections
    • New tax terms and concepts that may require adjustments to partnership operating agreements.