How Tax Professionals Can Scale Advisory Services with Reasonable Compensation and RCReports
As much of the traditional tax prep process is being automated by various tools and AI, it’s important for firms to identify advisory opportunities to continue to add value to their clients and stay relevant. Many firms don’t know where to start. It starts by expanding the value of the services you deliver – especially in the tax department. In order to scale advisory services, and thus maximize value to your client, it is important for firms to create repeatable processes that are efficient. In my opinion, one of the easiest ways for tax professionals to add efficient and profitable advisory services is with reasonable compensation. Let’s dive into how you can add this to your practice and watch your value and money tree grow.
Ensure Precision and Compliance with Reasonable Compensation
Historically, when an S Corp owner asked for help determining their reasonable compensation, I haven’t had a great way to determine what this figure should be. My methods have ranged from leaving it up them, to trying to get comparable wage data from others, to using one of the arbitrary “rules” often cited like the 60/40 rule. However, none of these methods align to the IRS Job Aid. Since shareholder-employees of S Corps are required by the IRS to take a reasonable salary before they take distributions, I knew we needed a more precise and compliant way to calculate this figure for clients.
This is where technology like RCReports shines – the platform is built using the same methodologies that the IRS uses to calculate reasonable compensation and combines that with the country’s largest database of wages to provide you with reports that are accurate and defensible.
“By using RCReports, we can ensure that every compensation analysis is both precise and compliant, eliminating the risk of errors that could lead to penalties.”
Most S Corp owners are used to their accounting professional glossing over the issue of reasonable compensation or coming up with a single percentage they apply year after year. By providing a data-backed report to substantiate their reasonable compensation each year, you can set yourself apart and protect your client from undue risk.
Streamlining the Reasonable Compensation Process
When done correctly, with all the necessary wage research and calculations, a reasonable compensation report could take a week or more to complete and cost you thousands of dollars. But with RCReports you can get a detailed, accurate report to provide to your clients in less than 15 minutes. This means that you can easily scale this service, while charging a premium.
“RCReports enables you streamline the entire advisory process, significantly reducing the time spent on manual calculations and reporting.”
Focus on Strategic Advisory
Providing a reasonable compensation report is only the beginning of the advisory opportunities you have when you incorporate RCReports into your practice. Because the tool makes reasonable compensation calculations so easy, you can spend more time on other services such as the ones outlined below.
Entity Planning
Do you have LLC clients that should consider switching to an S Corp? What about S Corp clients that should really be an LLC? Add entity planning to your roster of advisory services to help clients choose the structure that will be most advantageous for their business. RCReports has an entity planning tool that can help you create a detailed report in minutes that can be used to have a detailed discussion with your client.
Tax Strategy/Planning
Once you’ve helped your client determine their reasonable compensation and/or discuss their entity structure, it will open up the conversation for other tax strategy and/or planning services that you can offer them based on their unique situation.
Wage Benchmarking
As your clients’ businesses grow, you can help them benchmark wages for their staff. This is another service that is easily scaled using RCReports and their wage look-up tool. With this tool, you have instant access to the over 100 million wage data points in their proprietary database.
I found this field guide helpful in understanding many other ways that I could leverage reasonable compensation throughout the year to offer valuable advisory services to my clients.
Why You Should Add Reasonable Compensation to Your Advisory Stack Today
While documenting an accurate and defensible reasonable compensation figure is necessary for S Corp owners, this engagement also opens opportunity for many other valuable conversations and advisory services you can add to your firm’s offerings.
When looking at advisory opportunities, reasonable compensation powered by RCReports checks all the boxes: easy to implement, easy to scale, low-time investment, high-value to clients. When done correctly, it can be used to foster an annual discussion with a business owner about any changes in their business that might impact their roles and responsibilities and their related compensation.
