Under the TCJA, the tax rules for individuals have been completely overhauled, including tax rate cuts, the loss of personal exemptions, an increased standard deduction and cutbacks and suspensions of itemized deductions for 2018 through 2025. At the same time, the TCJSA creates various tax incentives for businesses, including:
a flat 21 percent tax rate for corporations
a brand-new QBI deduction for pass-through entities and sole proprietorships
bigger depreciation allowances
This turn of events represents a significant opportunity for CPA firms to generate revenue through the services and products they offer. Certainly, your clients can benefit from year-end tax planning strategies that maximize the tax breaks available under the new law. As a result, the nature of your client profile may undergo a transformation, if it has begun to do so already.
For example, Susan Tinel, a tax practitioner in San Diego has already noticed an upturn in business. Her practice currently consists of a mix of about 200 individuals and small businesses. The major revelation for her is the frequency of client contacts.
“What is changing is the one-time-a-year client who calls on April 10 is becoming a year-round client,” says Tinel. She doesn’t even have to drum up business on her own because clients are reaching out to her. For most them, the TCJA is the impetus for meeting more than once a year.
Tinel notes that the AGIs of her individual clients have grown along with her practice. The better they do, the better she does. Accordingly, she says that her personal wealth is linked to the wealth of her clients.
In addition, the new tax law changes for businesses have solidified Tinel’s niches with her business clients. In the wake of the TCJA, her practice isn’t as diversified and she is specializing in small business operations. In particular, Tinel observes that tax planning for businesses is more “intriguing” with the new QBI deduction. “It’s a whole new ballgame,” she concludes.
The new law may also result in practices developing other niches in their client profiles. Take Francis Varrone, the owner of a CPA firm in Montville, New Jersey with about 250 clients, who sees this going in a couple of directions.
“From my seat, I’ve observed his developing for some years now,” says Varrone. “It has taken two steps since the turn of the century when many CPAs obtained their financial planning licenses.”
First, Varrone notes that CPA/CFPs have always directed their practices to mostly personal tax preparation. Some firms are now preparing up to 1,000 returns annually. These practitioners will continue to offer a bundle of services, including year-end tax planning, retirement planning and estate planning that will be enhanced by the new law.
Second, Varrone has started to wean his firm away from personal tax preparation. He is now concentrating on corporate, partnership and trust preparation. In conjunction with this shift, he has implemented a flat fee structure. Although Varrone concedes that there have been “peaks and valleys,” he regards this as mostly a positive development for his firm.
Bottom line: The TCJA enables CPA firms to polish their niches while expanding services to a higher-income clientele. It can be a win-win for tax professionals at the end of 2018.
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a...