| Year-End Tax Planning Tip |
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Eliminate Your Client's Next Estimated Tax Payment
Year-end tax planning is now in full swing and is considered by many accountants to be the most important time of the accounting cycle for them to improve their client's financial position. A critical message we consistently hear is the importance of demonstrating your firm's value to retain clients, expand your client base and improve your bottom line. Year-end tax planning is a great opportunity to do exactly that by presenting ideas to your client to optimize their tax position. Cost segregation is a value-added opportunity that many accounting firms have incorporated into their year-end tax planning.
Many accountants are aware of cost segregation but only consider it when a client buys a building or constructs a new property. Many acquisitions and new projects have been put on hold or shelved completely due to the current economic crisis. However, opportunities for retroactive cost segregation studies can and should be uncovered in the year-end tax planning process for clients that have a cost basis of $1,000,000 or more in real property. A retroactive study can be performed without the problems associated with amending prior year tax returns or IRS approval. The difference between the allowed depreciation and what was actually claimed in prior years can all be used on the current tax return which could result in savings of $100,000 or more for the 2009 return.
A free model of projected benefits can quickly be prepared to determine if a study would be beneficial for your client. The study can then be completed in time to reduce or eliminate the January 15th estimated Federal and state tax payments.
Opportunity Identifiers
To determine if a cost segregation study is appropriate for your client, ask yourself the following questions:
- Is the cost of the real property (land excluded) at least $1,000,000?
- Has your client purchased, constructed or renovated any property in the past 15 years?
- Does your client plan on retaining the property for at least the next few years?
- Do they have net income that is currently taxed?
- Do they need extra cash flow?
Cost segregation is a valuable service that should be applied if you can answer "yes" to these questions.
Cash flow is critical for your clients this year. Cost segregation can provide some of your clients with a significant cash flow increase through a retroactive study. Now is the time to integrate cost segregation into your firm's year-end tax planning routine to uncover these opportunities and demonstrate your value to your clients.
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