As the year comes to a close, it’s time for firms to focus on strategic tax planning. AI tax accounting tools can simplify this process and help improve clients' financial strategies. For instance, it can help you pinpoint clients who need to make quarterly estimates, who could benefit from starting an S corp, or who should be making PTE elections.
With AI, these intricate processes can be automated, making tax planning more efficient and effective.
It’s The Most Wonderful (Planning) Time Of Year
Tax planning season is here. Whether your client is an individual taxpayer or a business owner, planning ahead can transform what's often a stressful time into an opportunity for future success. With the right AI tax accounting tools and strategies, you can handle any tax planning challenge with confidence and start a good new year.
Challenge 1: Identify clients who paid penalties last year (or owed a lot of taxes) who could use a check-in
When it comes to tax planning in Q4, it's important to check in with your clients, especially those who paid penalties or owed a lot of taxes last year. A proactive approach can help avoid penalties in the future, but identifying which clients are at risk is a time-consuming process. Tax accounting AI tools make it easier to find these clients quickly and ensure no one is overlooked. For example, AI can look at clients' past tax returns and payment histories to find patterns of underpayment. This helps you pinpoint where to recommend changes to estimated tax payments for the current year so that your clients maintain compliance and avoid fines.
Challenge 2: Identify clients who have Schedule C income who should form an S corp
Another strategy for Q4 tax planning is to determine which clients would benefit from setting up an S corporation. S corporation status can reduce tax obligations by categorizing a portion of income as corporate profit rather than personal income. This is especially important for those who file Schedule C and have a significant amount of net income (usually above $50,000).
Tax accounting AI tools comb through client data to help you pinpoint Schedule C filers who may be prime candidates for S corporation status. This automated analysis saves time, ensures no tax-savings opportunities are missed, and offers filing recommendations specific to each client.
Challenge 3: Identify clients who should make PTE elections
Pass-Through Entity (PTE) elections can reduce taxes for clients with significant passive income, like those who earn rental or interest income. They can also simplify the tax filing process for entities with multiple owners who face complex filing requirements. PTE elections allow these clients to streamline their tax reporting and mitigate filing errors, making this a crucial aspect to end-of-year tax planning.
Tax accounting AI tools can boost the benefits of PTE elections by finding tax-saving opportunities and recommending the optimal time for a client to make a PTE election.
Challenge 4: Identify high-income clients who haven’t maxed out their retirement contributions
Challenge 5: Identify clients who have quarterly estimates that need a check-in
As Q4 approaches, it's important to touch base with clients who have quarterly estimate payments. A quick check-in ensures that clients are on track with their payments and are aware of upcoming deadlines. Tax accounting AI tools can flag changes in income or deductions that might require adjustments to clients’ estimates and help them avoid underpayment penalties.