Federal Tax Updates | Level Up: Tax Practice Growth Tips

On this episode Roger and Annie review strategies for tax pros to strengthen their firms, including evaluating clients and fees, developing a niche, implementing new technologies, transitioning to subscription pricing, and creating a succession plan.

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Chapters

(00:00) - Federal Tax Updates Episode 14
(01:33) - Welcome to Federal Tax Updates
(10:26) - What to do with a client that is not experienced with technology?
(14:43) - What technologies can be brought to improve your service?
(20:51) - What can developing a niche do to help your firm?
(30:26) - What do people mean when they talk about Subscription Pricing?
(39:10) - IRS released OPR information reminders for succession plans
(48:16) - Recent IRS updates to be aware of.
(53:20) - Thanks for listening and please subscribe so you don't miss an episode

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Annie Schwab

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The full transcript for this episode is available by clicking on the Transcript tab at the top of this page

All content from this podcast by SmallBizPros, Inc. DBA PADGETT BUSINESS SERVICES is intended for informational purposes only.

Creators & Guests

Host

Annie Schwab, CPA

Franchisee Operations Manager at Padgett Business Services

Host

Roger Harris, EA

President at Padgett Business Services

What is Federal Tax Updates?

CPAs, Enrolled Agents, and Tax Preparers can keep up-to-date with the latest federal tax information while earning NASBA approved CPE credits and IRS approved CE credits by listening to the bi-weekly Federal Tax Updates podcast. The hosts Roger Harris and Annie Schwab have over 75 years of tax experience between them, which has been featured in various media outlets including Wall Street Journal, USA Today, The Morning Business Report, Bloomberg Business News, and Accounting Today.

Warning: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Roger: Hello again, welcome to another Federal Updates podcast. And Annie, how are you today? I'm doing.

Annie: Great. It's a hot mid-July. Texas kids are almost getting ready to go back to school, getting a little stressed already, But we're here. We're here to talk about some federal tax updates. In particular, we're going to do sort of like a mid-year check in. I can't believe the year is half over, but it is. We're going to be we're going to be hitting fall busy season before we even know it at the end of the year. I may as well start shopping for Christmas, right?

Roger: Yeah. Who knows where it's going? Yeah, it's hot or it's pouring down rain. And so I guess this is supposed to be the slow time. We're in between deadlines, so maybe it's a good time to kind of look at your business and figure out what I need to do to make it through the rest of this year. What do I need to do to make it long term? So it's yeah, it's just summer and that's true. It's hot.

Annie: Well, but summer's a good time to sort of reevaluate. I know we on a previous podcast had talked about coming out of tax season and sort of, you know, taking a check in to see what was good, what was bad, what needs to be changed, where your struggles were, maybe where your bottlenecks were, and set some goals so that you're not in sort of a repeat mode by the time tax season comes around. So hopefully if you if you are listening and you're thinking, where am I on my check in, are you making progress or are you in a slump or, you know, maybe you set some goals for the summer, maybe you set the goals for, you know, through the end of the year. But hopefully either way, that could be implementing new technology, hiring or firing. Looking at your staff, you know, are they in the right position or the right role, looking at your clients? You know, do they do they need more training? A lot of clients need training. Are your prices in the right point? You know, those kinds of things. So hopefully if you're listening today, hopefully you had set some goals, some short term, maybe some long term. And if we had to ask you on a scale of 1 to 10 where you are, maybe you could gauge that and then decide, is that where you want to be? Is there more work you need to be doing? And obviously, if you're not making progress. Why? You need to know the why.

Roger: And, you know, you hear people say tax season never ends. And I guess that's true, but this is probably as slow as it's going to get. And we have to devote time to work on our business, not just work in our business. You've probably heard us say that before, and that's really important. And again, I know you've heard us say this before because at some point in time you're going to want to get rid of your firm and hopefully you're going to have multiple people who want to buy it. But what we're seeing is that people are not paying for work that they think you should have done. So some of these things about keeping your technology up, having good quality trained staff, having the right clients, having the clients price, all those things that that you could look at. If you ignore them, you're going to pay for that when it comes time to sell because they're going to discount the price and basically say, you should have done these things, you didn't. I'm going to have to do them, so I'm not going to pay you the full value of your practice. Getting that, given that you chose not to do that and then like everything else that we go through a few of these things, you know, the IRS keeps giving us more things that we should be doing, and we've got some of those that came out, I guess, last week. Yeah, just last week. Yeah. That we'll go through and there's nothing we're going to talk about that you don't know. But having it all kind of put together in one place and saying you need to be doing this, it's kind of shocking when you think about. Yeah, maybe I should do that. So we're going again. We're going to talk about things you can do during the summer on your firm. Then we'll talk with some IRS stuff. Something tells me somewhere before it's over, we'll mention the I.R.S., because we always do. We have.

Annie: To. We have to at least touch on it.

Roger: Yeah. There's a little news. Not a lot of news, but a little news there. So any talk first, because I think the thing that attracts buyers and motivates us to come to work every day and helps us pay our bills and pay our staff is making sure we're getting what we're worth and getting top dollar or getting paid. Yeah, what what can I do in the summer to help with those things? I mean, I certainly. July, August, what am I supposed to do to help with that?

Annie: Well, you know, the clients, if you I would take a look at your client list. You know, the clients that are always late or don't respond or their records are poor or you're feeling as though they're a difficult engagement to maintain year to year. Check the price on those guys first, make sure that you're making a pretty penny on that one. And if not, that might be something to consider for that one poor client getting rid of that poor client. You might be able to pick up two new clients that, you know, pay pay their bills and, you know, have been trained and whatnot. But I strongly suggest two things. One, talk to your staff if you have staff, because they probably if you had to say who are the clients, you spend the most time tracking down information or answering questions, talk to your talk to your staff and see if they can pinpoint some clients and then go look at how much, how many hours, how much work you put into it, and then what that price is. There should be a standard price of value, you know, cranking out returns, punching numbers into a software that's different than providing a valuable relationship and charging for that service.

Roger: Yeah, there's a couple of things there. First of all, charging value is critical versus a lot of us grew up in a world where we build our time and time's good for calculating what it cost you, but it's not good at calculating the value of what you know and what you did. If you did an ERC claim and got somebody $1 million and you were able to do it quicker than somebody else because you knew the rules better, should that be cheaper because you were quicker than somebody else who took longer? The value of getting that person $1 million and getting it sooner than as opposed to later and being there for them and knowing it's correct. So it's a difficult concept for people to sometimes accept. But but we have to charge value of what it, you know, go to a restaurant, the menu. I guess there's something about how long it takes to cook it, but really it's worth what's the value of that meal? And we need to do that. That's not always easy to do, but there's plenty of articles and plenty of places to go to talk about value pricing. There's techniques behind it, but the value of what we do is going to reward you a lot more than how long it took you to do it, because if it was strictly about time, you should be as slow as you can be. So Well, and that we know.

Annie: I mean, I remember keeping track on a piece of paper to the, you know, quarter of an hour just to make sure I billed the client for the for the amount of time. And that was many, many years ago. But I do see the value in charging for a value. I think, you know, our profession is becoming more of a relationship, not just, you know, you walk in, get a haircut, walk out. I mean, this is something that you you're building a relationship. We're going to be an advisor. We're not just an accountant for that sense. And so keep that in mind and certainly see how you can add value to your clients. You know, Are you talking to them enough? Are you sending them articles or are you, you know, what are you doing to create that value as well is another question.

Roger: And you mentioned earlier about getting rid of some of the worst clients and replacing with better clients. Some clients aren't going to see the value that you provide, and that's okay. Yeah, that's why it's important to have an ongoing, I'll call it, marketing strategy so that you are comfortable in getting rid of that client who doesn't see the value or doesn't value your time and doesn't do what they need to do. And you can can shed that client because you know you've got one that'll value your knowledge and your expertise to replace them. And I moderated a panel, I guess it was last week at an IRS forum about some of these topics. And one of the panelists made a good point. He says one of the decisions you have to make is who's going to run your firm, You or your clients. Right. And. If you want to make money and have a good firm, you have to run the business. And it was interesting, after he made that statement, somebody asked a question and says, Well, I have clients and we all do that aren't good with technology. And, you know, I want him to do this and they don't want to do that.

Roger: And how what do I do with that client and. We've all experienced that and we all think, well, you know, how do I accommodate them? Gosh, they're good clients. Well, I'm going to say you don't. They don't unless you have a system to accommodate them. You know, that allows you to spend no more time with them, Charge just as much or maybe more because. But we have to be willing to tell that person I'm sorry. That's not how I do business anymore. I recognize it's different than what you're accustomed to. But instead of trying to find a way because if we if we try to find a way to accommodate every client's specific needs, we're not running the firm. They are. And but we fall back to what do I need to do differently to accommodate the client instead of what does the client need to do to accommodate my firm's needs and my employees needs? So it was an interesting conversation because we'd all been there and trying to change the mentality away from me. Changing to satisfy the client has to change to the client changing to satisfy what my firm and my employees deserve.

Annie: That's a hard thing to do. That's hard.

Roger: Yeah, because we probably spent the first few years of our life babysitting every client we had because we didn't have enough of them.

Annie: Yeah, we were afraid.

Roger: To say we were afraid. And that's why you got to. You got to have a plan to generate new revenue. Now, maybe that comes from referrals, maybe that doesn't. But you need to be in a position to to replace clients that won't follow your system with clients that will that will pay your fees. So getting rid of clients sounds like something nobody wants to do, but it might be exactly what we need to do and the summer is a good time to do it. It gives them time to adjust, to go find somebody else, to give you time to replace them, particularly if they're tax only clients or train them.

Annie: Maybe they're trainable. There are some clients that don't even. Yeah, they they would be happy to do what you want them to do. They just don't know that you want them to do it. So there could be those clients that just need to be to be trained, you know, I want this. I need that. I want in this format, this send it to me and this, you know, whether it's email or portal or whatever. And they just need to either be reminded or trained. And that's, you know, same same for your staff too. You know, if you have new staff or you brought somebody in and you kind of rushed through training or maybe they've been there for a while and they've taken on new duties or their position has changed, you know, sit down and talk to them, find out how they're doing, what's what's troubling them, what's, you know, a bottleneck in their system, Which clients are the the ones that are giving them a hard time? How can you make their day to day better, especially if they're remote, especially if they're remote. There's a lot, you know, having remote employees now with we've talked about staffing shortages and all kinds of stuff, but it's important to treat your staff well, make sure they know what they need to do, what you want from them, and then find out how it's going so that you can make sure that they're happy and they'll stay. Of course, that means also paying them properly, right? You know, and.

Roger: If you have to pay more, you have to charge more. Right?

Annie: There you go.

Roger: So let me talk a little bit about, you know, technology. Summer's a good time to look at new and different technologies. And we're talking about more. Again, I just said I was back in an IRS forum. And some people, when you ask them about their technology, they talk about their tax software.

Annie: Which is a big piece.

Roger: How they define technology. And I agree, we all need tax software, but there's so many other types of technology out there that can improve our firm. Talk a little bit about because I know what we do here is we have our COO, Amanda Aguilar, who's one of her jobs, is to evaluate all year and test all the new technologies and then present them to our offices and say, Here are some different technologies that can improve your system, can improve your way of doing business, can make your life better. And we've already tested, vetted and hopefully gotten a discount. Talk about some of the technologies that could be brought into a firm. If you define technology today as tax software, there's a much bigger world out there that you need to think about and and some things and some opportunities to to to mitigate staff hiring difficulties to improve the way you and your clients communicate to track work. There's just make a proposal. Talk a little bit about some of the different technologies that now's a good time to to look at.

Annie: Yeah, definitely. If you have not been looking at getting what's called a tech stack for your business, I do think that the summertime is a good time and the within the next year you need to start building that. So of course, tax software, of course, email, of course, your accounting package, whether that be Xero QuickBooks, however your however you're managing that. But it goes well beyond that. It's you know delivery. Is it portals is it. Are you doing? E-signatures. Are you, you know, saving everything up in the cloud? Are you generating proposals through a system that generates customized proposals that you can identify quickly and send out? Or are you sitting there hours drafting each proposal for each client that comes in and generating engagement letters that will go with your client organizers so that when the client gets their organizers, they have their engagement letters, they have everything there in one pretty little package. They can grab it from the portal, they can fill it out. They can send it back to you. All of those kinds of technologies. And then even if you go beyond that, there's technology for 1099 filing.

Annie: There's technology for like a document management type software where your files are there, you can annotate them, you can send them in and out, You can print to this document management system. So a tech stack is pretty big and it will, you know, investing in new technology is not cheap, but it is worth investigating. And when you find the right match for your firm, it will be worth it. Not every you know, there's competitors for everything. Not every piece of technology is the right one for you. So you need to spend the time, evaluate it, try it out, do a pilot, and then pick something that works with your firm and put it into your business processes so that it becomes very streamlined. So we do spend a lot of time in the summer doing that. And it's a it's a good time of year to kind of focus on especially coming out of busy season if you if you can identify a bottleneck in the process, if there's a piece of technology that can solve that, you need to look at it, see if it works for you.

Roger: And and you mentioned a proposal software. It one of the things that we have found at Paget in using proposal software is we get better fees because it takes the emotion out of pricing. You build in to your software what your pricing strategies are for lack of a better term. And then it does a unemotional proposal without all the I mean, we consider things like they're in a bad mood. I've known them for 20 years. They got kids in college, all of which makes no difference. Whereas this is just an unemotional approach to pricing based on what your firm needs to charge for what you do. So while it automates certain processes, it also literally helps you make money. So absolutely, technology is either should either make or save you money.

Annie: Absolutely.

Roger: Because it's either going to produce money or time.

Annie: And I will add one thing. We've we've seen it. We try coaching our our offices around this. It's very easy to tell the client all the things that you can do. But the client doesn't really probably care that what you can do. What they care is if you can do what they want you to do. So if for them, if having, let's say, a quarterly meeting in person is important to them, then make sure that's part of your proposal. If they don't care about seeing weekly bank account reconciliations, offering that to them is not a value to them. It's just another piece of paper, a set of financials. I mean, there are a lot of people who really don't want to look at financials anymore. They want you to give them an overview of what's happening in a projection and a this and a that. And so knowing what the client actually wants and then putting that in the proposal, not the other fluff will get you will get you their response. Right.

Roger: It'll again it'll it'll mean that you're providing what they believe is important what you are capable of doing at the right fee. So both parties win. Absolutely. Some people. A lot of people. Yeah. Go ahead.

Annie: No, no, no. I was just going to say, you know, every business and every business owner is different. Some really like the interaction and the phone calls and the meetings and some are so busy, they you know, I just know that you're there, having you there. If I need you, I'll let you know. You don't need to call me all the time. You don't need to email me all the time, you know, So you just have to understand what their needs are and that'll secure the deal.

Roger: Yeah.

Roger: If you read a lot about what we're talking about, ten webinars, seminars, whatever you hear a lot about, develop your niche. Now, first of all, what does that mean and why does that help?

Annie: It is something that's I mean, it's always been around, but by basic definition, a niche is nothing more than a segment of a group. So it can be like a service line. It could be tax accounting, payroll, something like that. It could also be like an industry, real estate lawyers, advertising marketing firms. And it can be as simple as just something you're interested in nonprofits or women owned businesses. And so what it's what we're talking about here is if you are working with a set segment of a market and you've specialized in that, it's like running a business for that niche. And there are pros and cons to both developing it, growing it, identifying it. All of these things come into play. But we are seeing that firms who do specialize in a certain, perhaps industry, let's say, are attracting other people from that industry. Word of mouth and their their processes are becoming so efficient that they can make money and turn that project over and over and over again. And then they're becoming what's called like a subject matter expert in that industry, which sort of develops their brand, their ability to advertise themselves, hold them out there as being someone that's knowledgeable in this type of practice. So, you know, it is something that I think we probably have overlooked in the past because you never wanted to tell a client. No. That you don't fit my model or you're not the type of client, you know, that I like or I work on or I'm used to or I, you know, I'm taking on clients. I don't know. Roger, Have you seen similar? Things in the industry. Oh, yeah.

Roger: What's interesting is we have failed to recognize what the legal and medical profession realized years ago. I mean, if you go back, particularly my age, you used to have you went to one doctor for everything. There was your general practitioner and the surgeon. Those were that was about it. Yeah. Now, every part of our body has a specialist. That's true. And you end up going to a different doctor no matter what part of. Depending on which part of your body is hurting. The legal profession. Now, there's trial lawyers, there's real estate experts. There's all over TV, there's personal injury experts, you know, so niches, you know, first of all, they establish your credibility in a certain field. And it usually and it should mean that you get to charge more because you are and it broadens the base in which you are desired in the marketplace. We actually have one of our franchisees is considered one of the prominent experts in the country in horse racing. I know in race horses, not the racing, the horse, the horse. And and he gets calls from all over the country because he is established as an expert in that niche. And.

Annie: You know, that's.

Annie: I don't know how many of those experts there are that know that much about the racehorse, but, you know, you can be an expert. You probably have a niche. You just haven't thought of it. That's exactly what your business clients. Yeah. And look at them. You probably have realized, gosh, I got more of these if you took your client list and kind of put them into categories and looked at the industries they were in and also look at like corresponding industries. So like if you have a bunch of real estate agents, maybe cost segregation is something, you know, because, you know, kind of think of what's involved in that industry doesn't have to be completely straight line. But if you took your client list and put it out there and looked at your margins and saw which ones industries you were making more money on, or maybe that's the good clients and you really enjoy working on those, it can be, you know, any kind of any kind of scenario that works for your business, but you're, you're building competency in that niche, which.

Annie: Means, like we were saying, your brand, your expertise, you're holding yourself out there, and those people in that industry are going to give you referrals because they they're building a relationship with you. And so I do think by referral, you will grow that niche very, very quickly.

Roger: Yeah. And again, it allows you to focus on, you know, we all complain about, gosh, how do you keep up with all this tech stuff? Well, you can focus your learning, you can focus all of that stuff into your niche so that we're not trying to be an expert in everything. We're trying to be an expert in our niche. And that makes learning easier. It makes, you know, all your clients kind of look the same in some ways when they come to you.

Annie: Similar transactions.

Roger: Yeah, it's probably it's probably going to also be an area in which you're interested. Yeah.

Annie: And it's so easy. You can get on these, you can go to like local industry conferences and kind of do networking. You can subscribe to the trade journals, you can kind of target and market to that niche environment. Where do they all hang out or what conferences do they go to or or that kind of thing? Um, I think it's a, I think it's a great idea. And here we are talking all these wonderful things about it, but when there's some pros there, generally cons and really the only con that I can think of is that you're pigeonholing yourself into an industry. Let's just say if you were into the blockbuster DVD rentals and you focused on that, you're probably out of luck, right?

Roger: The industry could probably probably out of business.

Annie: Yeah, well, you're out of business, too. So, I mean, there's always a risk associated with focusing on a specific industry, but I don't think lawyers are going anywhere. I don't think real estate agents are going anywhere. So, you know, just choose wisely.

Roger: Probably franchises can be a niche. Restaurants can be a niche.

Annie: Oh, absolutely.

Roger: Retail You may describe your niche as just small business. You know, just and but what is your definition of a small business? Does that mean, you know, a thousand employees or does that mean 20 employees? Yeah. No, I mean, you.

Annie: Can design it however you want. I mean, you said restaurants. I mean, if you have a whole bunch of restaurant clients or you're targeting restaurant clients, then you can start focusing on things. I don't know, tip credit, you know, something that's specific to that industry. Know it in and out. Be able to talk the terms. Be able to discuss things that go on in a restaurant that make you feel like you're part of the team with that client. You're not just someone who's taking the books and punching numbers in and getting tax returns or financials. You know, read like I said, read up on the journals, go to go to the learn the terminology of that industry.

Roger: It'll actually help your ability to to be a good presenter and try to get a client because you can speak the language of the business that you're talking to. So you can go in and have a discussion and show that you are an expert in in their business. And that's going to impart a great deal of confidence in in you from them, right? It's going to make them want to do business because you talk their language. You're not just talking some general jargon tax code mumbo jumbo with them that, you know, anybody could do. So it makes you sound smarter because you probably are. So I think given that we're in the summer, go back and look, you may have a niche that you don't even recognize, but if not, start thinking about if you're going to start a which we hope you will start a campaign to get new clients to either develop a niche or to get rid of the bad clients. What is your what's your area of expertise? Where can you focus and come across as a much more qualified person that makes them want to do business with and oh, by the way, probably pay more. Well, and you mentioned this, they can brag. I got this guy. He's an expert. Yeah.

Annie: And it used to be where you needed, you know, what's needed in my local community right here. Well, I mean, now you can have client all over the states. It doesn't have to be what's happening in your small community or, you know.

Roger: Right.

Annie: Your location should not matter.

Roger: Nope. Our, our our most valuable asset is our knowledge. And there's no border to where that knowledge can be used just because there's a city limit or a state line or anything. None of that matters. If you have the expertise and the knowledge that enough people need in today's world that you can service them. You know, maybe they like to sit across your desk to talk to you. But you know what? Zoom and teams are almost the same. And if they feel bad enough, they can fly to you. You're not going to them. Exactly. Exactly. Now, if we let's talk about one other element. Again, these are things that if you go and you you read and you talk about the modern firm and how to be successful. And a lot of this also has to do with work life balance in the sense that you're repeating and your systems are all designed for this. What do we mean when you hear what do people mean when they talk about subscription pricing?

Annie: Sure. So subscription pricing is basically a model where customers pay a reoccurring fee, kind of like on subscription regular intervals, monthly, weekly. However, that turns out for an ongoing access to a service or product. That service and product is you, your firm. And so what it can it's good for both people. One, the business has these continuous predictable revenue streams and then the customer, the client would enjoy continuous access to you, your service, your your expertise, your talents. That kind of thing. And as long as you figure out a good balance between you as the business owner is happy and you as the tax preparer is happy, then subscription pricing can be very useful. Again, a proposal system can generate these types of subscription pricing and then it just sort of reoccurs. You can so much easier for you to plan ahead cash flow planning, cash flow management, any of that kind of stuff all comes into play. And having a subscription pricing generally means that you're going to have a stronger relationship with that client because you have more interaction with them. Stronger relationships build committed clients. It enhances the value of your services. Again, you can get paid more. So subscription pricing, I mean, it's been around. It just wasn't necessarily focused in our industry. I don't think, you know, like you said, you work for X hours for X tax return. You collect the fee, they go away. Next year they come back. That was sort of the model. And we're moving away from that. We're moving away from being an accountant and a tax preparer to being, you know, an advisor, a trusted advisor with your clients. And so subscription pricing is a way to get there.

Roger: It puts a structure and it also eliminates giving away a lot of free advice. One of the nice things about a subscription model is, again, there's different kinds, but it puts some structure to how often are we going to meet, what are we going to talk about? So that instead of them picking up the phone and calling me whenever they feel like it, and me being in a rush, giving away information for free, we structure that into quarterly, monthly, whatever, whatever the client and you decide on. But it puts a structure around a conversation when all these things can be discussed and advice can be given and information can be shared. I mean, think about it. How many times do we do a tax return in March and find out something happened in October that we didn't know about and the negative ramifications of that either more taxes due that they didn't plan for or penalties or whatever the case may be. But if you set up a a strong subscription based service where you're being compensated for regular interactions, you not only get paid throughout the year and you usually get paid a lot more than if you just did the tax time. Yeah, but you put structure around the relationship and you start getting paid. I would love to have all the money that I have given away for free and valuable advice just because somebody picked up the phone and asked me a question and the quickest thing for me to do was just to answer it. Yeah. Instead of saying, Well, wait a minute, I should get paid for that. Try to do that with your lawyer.

Annie: Oh, of course.

Roger: Just call your lawyer every month with a question.

Annie: This type of relationship allows you to be proactive instead of reactive. Just like you said, if you're meeting quarterly, you're going to, you know, they might mention something in conversation or you might see something on the books or whatnot, and then you can help them make decisions before year end where you're not trying to either undo it or try to understand what happened or, you know, being proactive is going to help them. Plus, you're going to understand their goals. You know, if you're if you're talking to them quarterly, you can see, you know, what's something's frustrating you something you know, you know, a common thing I hear all the time is if I'm making all this money, where's the cash in my bank account? How come I don't have any money to, you know, you hear these kinds of things. And so, you know, you're you're going to build a relationship. You're going to regularly communicate. You're going to align the work that you're doing with the goals. We talked about that one, you're going to try to exceed their expectations and be proactive so that when tax returns come, it'll take you less time to get it done because you've been involved in the business throughout the year. So it's a win win.

Roger: And you when you combine a niche with subscription, absolutely. You have really done something dramatically different to your firm because now you're repeating a lot of your learning in each discussion that something that will help someone else. You're sharing the same advice. You're disseminating it out in a way that you know, and those meetings can be in person, they can be virtual, they can conceivably be with key members of your staff. I mean, this doesn't have to be to avoid you, but you develop both a niche and a billing system that generates more money because the advice is being paid for. It spreads out the cash flow better throughout the year. And it should make to your point, Andy, the tax preparation job a little bit easier because there's not the surprises that are not as many. They'll always be surprises, but the big surprises should should go away and. It also provides predictability for the client, knowing that, Hey, I've got this going, Oh, I'm going to meet with Annie next week, so I'll just save it and I'll get that advice instead of forgetting about it until I bring my tax stuff in and say, Oh yeah, I meant to call you. But then you find out all of these, these things. So now, now can you change all of this? It's the end of July. Can you change all of this before October 15th? No, no. But you can start.

Annie: It's no, it is a process. And and it requires change and a lot of investment in time and probably some money if you need to upgrade your technology. So it is I think it's a, like I said, a process. But the sooner you start, the easier it'll get. And there are going to be some clients who adapt very quickly. Some that maybe give pushback. So, you know, you have to decide what your business is going to be for you if you want subscription option pricing niche, then go for it. You can do it. Just remember, you might have to say no to a client. You might have to fire a client, you might have to retrain your staff. It's going to be time consuming. But in the end, when you go to sell, I think it's going to be well worth the effort and the time.

Roger: Well, it's also going to reward you throughout your career once you do it. This is making these changes is a little about almost like whack a mole. I mean, every time you knock something down, something else is going to pop up that has to be addressed. But eventually you've knocked them all down and you have a modern firm with a well trained staff, a good reputation in the community as being an expert. You spread out your cash flow, you get more money at the end of this journey, however long it takes. It might take some people a year, it might take some people five years. But the end of that journey is a much better firm while you're working in it. But definitely a firm that because at the end of the day, when it's time to retire and sell your firm, you don't want to be negotiating with one person. You want ten people that want to buy your firm. That's how you get maximum value. Why did real estate why did houses go up so much last year? Because there were too many buyers and not enough sellers. Right now. There's a lot of sellers, but they're not all the kind of house you'd want to buy. So that's true. You need to you need to make your firm the house that everybody wants to buy so that they come in because, I mean, there were people selling their houses in 24 hours for way over their listing price because of competition. Yeah. Yeah. So the goal here is to create competition in the marketplace for two things for our services and then for our firm if we can accomplish those two things. We're going to be pretty successful in this business and the summer is a good time to get started.

Annie: Well, even the I'll move us to the next section, but even the IRS came out and over the summer. Let's see, June at the end of June, I believe OPR, the Office of Professional Responsibility, came out with information, reminders and information encouraging all tax preparers to have some sort of succession plan, whether you become if you die or you're unable to participate in the practice anymore, it's crucial to ensuring a smooth transition of your from your leadership in the business to some someone else. If that happens. And they came out and said, you know, a succession plan that addresses how the practitioner's business should be sold or terminated when the practitioner retires or become or deceased.

Roger: So yeah, you probably never thought that somebody had an opinion on that. But they do.

Annie: They do.

Roger: And because there are actually rules that have to be followed in those instances, of course.

Annie: Of course. So they have come out and they've they've basically said, you know, the first step is to decide who, you know, the who, what happens to you, who is the one that's going to step in and and continue the practice or, you know, for a temporary time or who's going to buy it? You know who that person is. You have to think really hard. You know, who's another tax practitioner, who in the family who in the firm has the expertise, the values, the understands my business. You know, who would that person be that you would want to list? And then you have to train that who you have to let them know they are your who and make sure they want you. But then also, you know, how are you going to to let them know where everything is, Where are your passwords? How are they going to get access? You know, where are your files saved, all of these kinds of things. And then keeping this is the the big part, keeping your firm up to date, modernized and prepared in case something happens to you so that the transition can be easier. Of course, all these things are easier said than done, and most people don't really want to think about their succession plan unless they're trying to retire. But if Guess COVID has ever taught us anything, you never know what's going to happen. So, you know, being prepared is always.

Roger: And you know, I don't have to admit I wasn't even sure I realized that Circular 230 addressed this. But it does. And it makes sense that it does. But most firms are kind of out there on their own. And. You know, and I'm going to give Annie and her group a compliment because, you know, we have a network of almost 200 firms in the last two years. We've had one suffer a big illness and another one actually die. But because we were in a network, a lot of the things that this plan calls for were in place more by accident than intent, in the sense that these firms didn't really set them up, but because they were part of Ann and her team in the middle of tax season, was able to keep these two firms operating until either the owner came back and was able to take it back or until a buyer or a system could be put in place to keep it going. But that's because we were part of a network. The average firm out there is out there on an island by themselves. So you've got to identify and it's a tough discussion to have, you know, go to a competitor and come up with some sort of joint relationship to say this is what happens if something happens to me, this is what happens to some of you because the clients don't have the luxury of waiting you out if they need a tax return done or they need their payroll generated or whatever their needs are, they're going to move to keep their business functioning. They're not going to wait on you to get healthy. And God forbid, if you die, they're not going to wait till you figure out who's taking over. And if you don't have a plan in place, all the equity that you've worked in all your life to build could be gone in 30 days.

Annie: Yeah, that's not fair to the family either.

Roger: You know?

Annie: No. Think about all your hard work and you know, your family doesn't want to be left making decisions about your business. So, you know, put it in writing. Think of, you know, get it, and then revisit that plan. You may change your mind in five years about what you want to happen or how you want this to go down.

Roger: So you want to partner with.

Annie: Who you want to partner with. Exactly. And like I said, it could be somebody external. It could be an employee, it could be a family member, you know, So the who will require some some thought, I think unless maybe it's.

Roger: And you also need to to understand and I encourage you do we have the that was it an announcement a notice it was an alert on June 27th. It was an alert because there's also certain legal processes you have to go through in terms of sharing client data and informing clients of certain things. So it again, this is something you can definitely work on this summer, is putting this plan in place because we all think this is going to come when we want it to come. But as Annie's team found out the last couple of years, neither of these two offices or people expected or wanted this to happen. It came up suddenly, but her team was able to step in and protect the equity for the family. So we all think, well, what can happen? Well, it can happen quickly. And this summer is a good time to start a being aware of what the the rules are for certain things, but at the same time, putting some plan in place. You're doing this for your family now. Maybe the family works in the firm and those are going to be the people who can take over. But for a lot of us, our families don't have anything to do with our business other than hopefully benefit from our success. Yeah, Yeah. So it's going to require coming up with some sort of relationship with somebody else to to protect the equity of your clients as much as your clients love you and want you to be there, there's a point at which they have to move on and they're not going to be able to keep hanging on for you to come back. Well, the.

Annie: Feds, through Circular 230 have very specific what do you do with your PTEN? How do you deal with your account, your calf count? Like, you know, there are certain things that feds but the states may also have depending on the state that you're in. The state may also have requirements as it relates to succession or what or what happens. So keep that in mind, too, as you're developing a plan. And some of this some of the items would relate even if it was a family member already in the business. You know, your PTEN for signing your in your, you know, all of these different designations would still require, you know, changing the name or changing this or doing that or so, you know, even if you're thinking sitting here thinking, Oh, well, you know, my son's in the business, he's just going to take it over. It'll be a smooth transition. He knows where everything is. There's a lot of legal aspects to it, so keep that in mind as well.

Roger: Yeah. You mentioned something. One simple thing you should all do after you listen to this podcast in the summer, check your application because depending on how you applied for your even if, God forbid, something were to happen to the person who made the application, it's conceivable you could lose the authority and the ability to e-file because the person who applied, if it was a corporation, didn't list any other people or whatever the case may be. So go look at your application. Yeah, at least have to. And you know, two that are still around. If one of them was somebody that doesn't work there anymore because literally you could run out of the ability to file in the middle of tax season and there's some expedited processes. But why go through that? Why not just be able to continue your business going on? So let's summarize this and we'll touch a little bit on some IRS stuff. Just, you know, I don't know that there's anything dramatically new, but some things. But take advantage of this time. It's too hot to go out and do anything or it's raining too hard. You get washed away if you go outside, depending on where you are, take this time to to to work on yourself and your firm.

Roger: Don't just we think a lot about our clients and their businesses. It's time you think about you and your business because ultimately that's why you got into this is for your hopefully for your benefit and your family's benefit. And at times I think we ignore our own business at the expense of our clients. Summer is a good time to start, not to expect to complete it all, but get it started. Yeah, identify some critical areas, start working on it, and if you need help, identify where you can get that help and go seek it. Because most of the problems we have in our businesses, there are solutions. But you got to be willing to make the changes that those solutions are going to require. And now's as good a time as any. So, all right, let's get into some technical stuff, Annie. The IRS reaffirmed today about the E file mandate. Anything new in that? You know, we got ten is our number. Ten is our.

Annie: Number. The form listing still remains the same. That does begin at the beginning of the year. I will say that there's updates if you have not logged in to your E services account and done the whole thing, and if you are still doing after the fact payroll and you know, look over, there's some FAQs out there, look over those because you just don't want to be caught off guard at the end of the year trying to figure out a process to make sure that all these information returns are e filed. Perhaps even think of outsourcing it to a 1099 or ADP or something like that. But the rules have gone down to ten information returns and that's like, let's say you've got five W-2s and you've got six, ten, 99. It's not ten of each type that counts as 11 and you're over the threshold. That's that's kind of the tricky part there. But yeah, I didn't see anything new in that. What else came out? Roger I can't remember now.

Roger: The only thing I'll add one thing there, because we mentioned this before, if you're using like an ADP paychecks or something to do your payroll and they're filing electronically, even if you're under ten, you still got to file the 1099 electronically because they did vote. Yeah, there wasn't a as far as regulations or anything since we did this, nothing new. I mentioned I was at the IRS forums and got a chance to spend some time talking to some IRS people. This will be our.

Annie: Pitch.

Roger: By weekly IRC discussion. They are looking at coming up with some sort. I don't know if the right term is amnesty, safe harbor, something to enable some of our small business clients that kind of got taken advantage by the Mills Crooks and the IRC world to try to find some way to to motivate the paying back of the funds that they shouldn't have received. But no promises to win or anything like that. They're still processing about 90,000 claims. That's what I heard. I think it was a week. So, I mean, it's not slowing down. If anything, it seems like the advertising has picked up. I mean, I don't know.

Annie: It could be coming up to that statute of limitation period where they're kind of rushing it. I don't know.

Roger: I don't know. It's just think with.

Annie: The audits that would have gone down. But.

Roger: You know, audits are starting. You know, despite the IRS cutbacks, the IRS is determined to try to they know they can't audit their way out of it, but they want to do enough to try to make doing it correctly matter. One piece of advice, if you have clients who went to a third party to have their claim done, make sure that client got all their records and all the calculations back because the audit is going to expect the business owner to be able to say, here's all my employees, this is how much of their wage went to peep, this is how much went to IRC and it's going to have to match even though all the firm had to do to get the credit was put a number on a certain line on the 941.

Annie: Documentation is going.

Roger: To make sure they're getting their records because the fear is that on April 16th of 2025, as the statute starts running away and there's no longer money available that these firms are going to disappear with those records. And the IRS has made it clear it's the business's responsibility to be able to document their claim, whether they did it or somebody else did it. So don't let your client just get a form 941 X from back from these people and think they have all the records. So that and again, there's some recognition that the I.R.S. is putting pressure on the good preparers in the system.

Annie: I saw that.

Roger: To do things. But I don't there isn't wasn't a lot of promises made.

Annie: There is a webinar by the IRS is putting on, I want to say July 25th, 25th, something like that on IRC. I saw it come through my email and and I kept an eye on it, I believe. So it's a one hour free webinar on the IRS. If you go to the IRS web page, you can kind of type in the top corner there there. So I don't know. Sometimes the IRS, I'm not going to lie. The IRS webinars are usually not the most interesting, but you might be able to get the slides or at least see the information. If you're looking for kind of an update to I'll be promoting that.

Roger: Yeah, they're promoting it as something to deal with the practitioners issues. So we'll see. Yeah. I don't know if that means there'll be any practitioners presenting, but supposedly they're going to be. This is for practitioners talking to practitioners about the challenges with the IRC. So good idea to watch that and.

Annie: Well certainly.

Roger: We're going take a.

Annie: Peek at it and see if there's anything that we need to share with you guys on our next podcast.

Roger: Yeah.

Roger: And now that we've mentioned the IRC, I guess we can wrap up now. We have done everything we have to do on one of our podcasts. Any, any last minute thoughts or anything?

Annie: No, I know that was a lot of information and sort of sent you on your way with some, some goals and some action items for this summer. But don't be overwhelmed. Don't be nervous. Give it give it some thought. Baby steps. It's a process. But I think you know, you can do it.

Roger: Just get started. Just get just get started. Get create the old snowball going down the hill. Yep. That's it. Bigger. All right. Well, Annie, as always, thank you for all your hard work and doing this. Thanks to you for listeners for for listening and joining us today. We'll be back in a couple of weeks with another federal Tax Update podcast. We hope you'll join us and we'll see you again soon.

Annie: Thanks.