Tax planning: Paving the way for more commitments

There are two things we cannot avoid on this earth: death and taxes. For audit firms, one area where they can be helpful to non-audit clients is tax planning. There are many finance and accounting outsourcing companies or even auditing firms that are dedicated to preparing tax returns. If you can combine the two, you create longer engagements with customers.

Tax planning can also open up opportunities for other services such as retirement, financial and investment planning. All of these also have tax implications, so tax planning can pave the way for these additional services.

An April 2021 survey from Arizent showed that the top four most commonly provided services are tax planning (98%), business planning (88%), retirement planning (84%) and investment planning (79%).

However, few companies or consulting firms really have the time to conduct tax planning. These firms or even outsourcing companies are too busy with tax preparations for non-auditing clients that they barely have time to perform other services. In Arizent’s survey, more than a third or 36% of respondents said they do not provide such services directly to customers due to the time required to train employees.

What is tax planning and what does it consist of? There are so many definitions, but the easiest to understand comes from Tax planning is a core part of financial planning. It helps analyze where a business can legally maximize tax savings and mitigate tax burdens while remaining compliant with tax laws and regulations.

In the Arizent survey, respondents said planning could be the start of a one-stop shop for retirement planning (63%), business planning (46%), asset allocation (22%), cash and debt management (32%), among others.

In the Philippines, however, few clients see the benefits of tax planning and few accountants are available to provide such services. The latter think (like me) that it can take up a lot of their time and the lack of employees capable of carrying out the function is also a concern. This means that a lot of training is involved to help staff develop expertise in this area.

The potential is huge, however, and it can snowball into other services. The added benefit is that you can build customer loyalty and develop the professional knowledge of a company’s employees. Given the many BIR regulations and tax updates, it can save clients a lot of headaches and possibly tax savings if concrete and proper tax planning is in place at the start of the year or even before.

However, if you perform an external audit for a client, you cannot perform tax planning for that client. Still, there is a lot of potential for the service because, big or small, businesses and individuals all need tax planning.

Tax planning involves three basic methods: taking advantage of tax avoidance (this is a legal way to minimize tax exposure) and tax credits, and maximizing allowable deductions and minimizing legally taxable income. These are basic methods but there could be more complex methods such as how to protect a rising asset from inheritance tax or plan ahead whether to give properties to heirs or allow they are subject to inheritance tax if the owner dies.

Few taxpayers see the benefits of tax planning – that’s why only a few take advantage of it though they should. Through tax planning, they will not only be able to minimize their tax exposure for the current fiscal or calendar year, but also for the future. Tax planning touches on all aspects of tax matters, from investments and retirement benefits to estate taxes. Although this may mean more time spent with an accountant, the tax benefit will offset the time and fees paid.

For the accountant or CPA, this may take many hours of work – not only for him but also for his team – but the savings that the client will realize will certainly translate into better returns. More importantly, the satisfaction of helping your customer is something that money cannot buy. We hope this will result in more services that can be offered to the customer. The experience gained in providing these services will also provide the accountant or CPA with chances to serve more clients.

Wilma Miranda is Managing Partner of Inventor, Miranda & Associates, CPAs, Chair of the Media Affairs/Publishing Committee of Acpapp and a member of the Board of Directors of KPS Outsourcing Inc. The opinions expressed here do not necessarily reflect the opinions of those establishments.

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