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10 Simple Wins to Build Your Dream Tax and Accounting Practice
- February 1, 2023
- Posted by: Hana Adhami
- Category: Blog
Views: 290By Eric L. Green, Esq.
Tax season is ramping up once again. Are you feeling less than enthusiastic about how your work and personal life will roll out over the next few months? Long hours, endless tax preparation, and low-margin clients, the grind of tax season is real and if you can relate, then it’s time to make some real changes. Take a deep breath and make a plan for this time next year to be different.
From my own experience (I was once a tax accountant, too), one way to make an unpleasant situation a little more bearable is to make a step-by-step plan with some simple wins that you can create along the way to make you feel like progress toward your goal is possible. This is exactly what I did to build a multi-million-dollar IRS representation practice as an attorney.
Consider the following eight easy steps to build the practice of your dreams—pulled from my book, How to Build a Million Dollar Tax Representation Practice. These were some of the simple wins that helped me make a change that was much needed from tax compliance to helping save taxpayers from serious distress while also enjoying a less stressful and more profitable practice:
- Identify what you want your practice to look like. It’s so important to take the time to determine exactly where you want to take your practice upfront.
- Engineer your practice backwards. If you don’t make a plan for where you want to go, you will never get there. Start thinking about the practice you want now so you have clear direction and don’t waste time or money.
- Create your service offering. To have a dream practice, you really do need to identify what it is you want to do and, more importantly, what you do NOT want to do. Make a list and then make it so.
- Leverage technology. Technology is critical if you are going to reduce the hours you work and increase the profitability of your firm. RCReports, for example, is a simple win when it comes to accurate reasonable compensation reports. It makes no sense to spend hours with spreadsheets when you could utilize this tool to free your time.
- Examine your existing practice. If you have an existing practice that is not bringing you joy and profits, you need to understand why, then change it. A simple win here? Ensure that your clients and profit margin align with what you want to be doing and earning. Then make sure you get paid on time.
- Find your ideal clients. When it comes to attracting the clients you want, your marketing mindset can be the key: simplify your marketing message and then be consistent with the means to spread the word about what you do. Put these two strategies in place and you will be golden!
- Plan the training you need. Having the training you need to be the best in your chosen niche is a simple strategy for dominating your niche. To bill like a specialist, you must be trained as a specialist. Want to know more about reasonable compensation and why it is so important? Check out this comprehensive training webinar here.
- Practice discipline, do not depend on motivation. Building a dream practice is an exercise in discipline. Motivation will wax and wane. You need to simply list out what you want to achieve then do what is necessary to knock out your action items each day.
Those are eight wins that I have used to build my firm to over $5 million. Most are very simple (but perhaps not always easy) and I’ll conclude with two more for a top ten list:
- Take action now. If you wait, you’ll only delay the dream practice that you deserve.
- Celebrate the progress you do make. Be thankful for all the opportunities you have to make a difference for yourself and your clients as an amazing and dedicated professional. Taking time to focus on what is right about what you’re doing is one simple but very powerful win that you can score each and every day this tax season and beyond.
It’s also important to keep your eyes on the prize so to speak. Make sure you download our 8 Steps to Build a Million Dollar Tax Representation Practice, eBook which can be applied to any niche you want to serve. Use it to remind yourself to put these simple wins into action. Then go make it happen so that next year, you can really be looking forward to what lies ahead!
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Help! My New Client Didn’t Take Reasonable Compensation Last Year
- January 1, 2023
- Posted by: Abbie Deaver
- Category: Blog
Views: 824By Paul S. Hamann & Jack Salewski, CPA, CGMA
This is a question we get a lot at the beginning of the year: “I just took on a new S Corp client and they didn’t take any Reasonable Compensation last year. What do I do?!”
First things first: Reasonable Compensation only applies if the owner takes a distribution. If the owner did not take any distributions last year, they are still in compliance. This situation is rare as most S Corp owners can’t go a whole year without taking salary or distributions from the business. If this does happen, the shortfall in owners’ compensation needs to be tracked so it can be made up in future years. If it comes up it is a great area for you to offer advisory services.
Be aware there are lookback periods that are associated with Reasonable Compensation. If the S Corp owner takes distributions for a two-year period, for example, they will need to pay themselves Reasonable Compensation for those two years. For more on this scenario take a look at example 4 in this blog post.
Ok, on to a more common scenario: The S Corp owner did take distributions out of the business but took zero or low reasonable compensation.
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Simple Guide To Reconcile S Corp Reasonable Compensation
- December 1, 2022
- Posted by: Hana Adhami
- Category: Blog
Views: 5,031By Paul S. Hamann & Jack Salewski, CPA, CGMA
With the last month of the year here, it’s time to reconcile Reasonable Compensation for your S Corp clients. If you are not familiar with the process of reconciling your S Corp owners’ Reasonable Compensation, you are not alone. On the other hand, it is typically a simple process, but can be a bit of a chore if your clients have strayed from your plan or best practices.
You will need a few pieces of information to get started:
- Reasonable Compensation Report for the S Corp owner from the beginning of the year
- An updated Reasonable Compensation Report as we finish up the year
- Payroll records and records of distributions
If your clients followed last year’s plan, best practices or nothing has changed in their world you should have little, if any, needed adjustments. If not, we’ll lay out how to make adjustments based on a few common scenarios.
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Reasonable Compensation Horror Stories: The Tax Man Cometh
- November 1, 2022
- Posted by: Abbie Deaver
- Category: Blog
Views: 3,422By Eric L. Green, Esq.
When my office phone rings at 5:30 on a Friday afternoon, you know it’s probably bad. This particular call was no exception. On the other end of the line was Bob, a CPA I had known for years. “Counselor,” he started, “I have a real problem.”
“Okay, Bob, what’s the problem?”
“The IRS audited a few of my S Corp clients and then expanded to a few more. They claim my clients should have been taking a reasonable salary.”
I agreed with that. “How much salary did the clients take?”
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Accurate Reasonable Compensation Calculations Add Up to Additional Revenue for Firms and Payroll Tax Savings for Their Clients
- October 21, 2022
- Posted by: Abbie Deaver
- Category: Blog
Views: 75John Coleman, CPA, is the owner of Commonwealth Business Services in Fredericksburg, Virginia. The firm offers a wide variety of business services, specializing in tax preparation for individuals and businesses and small business accounting. Since signing up for RCReports, they’ve seen an increase in customer satisfaction as well as firm revenue.
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If It’s Not Documented, It’s Not Done
- October 1, 2022
- Posted by: Abbie Deaver
- Category: Blog
Views: 520By Paul S. Hamann & Jack Salewski, CPA, CGMA
Having a Reasonable Compensation figure that is “reasonable” isn’t enough anymore. With the IRS turning up the heat on Reasonable Compensation compliance [See IRS TECH TARGETS S CORP OFFICER COMPENSATION], having that figure backed up by a credible source and documented is now critical in order to defend an IRS challenge.
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Unpacking the Increased IRS Enforcement in IRA22 for S Corps
- August 18, 2022
- Posted by: Abbie Deaver
- Category: Blog
Views: 1,866By Paul S. Hamann & Jack Salewski, CPA, CGMA
The Inflation Reduction Act of 2022 (IRA22) was signed into law on August 16, 2022. The goal of the package is to raise $737 billion in revenue over the next decade, with $127 billion of that revenue coming from increased IRS enforcement. While it will take time before we understand the full implications of the bill, there are steps you can take now to ensure you and your clients are protected when the IRS ramps up examinations.
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IRS Tech Targets S Corp Officer Compensation
- August 1, 2022
- Posted by: Paul Hamann
- Category: Blog
Views: 3,764By Paul S. Hamann & Jack Salewski, CPA, CGMA
The IRS is deploying technology and big data to combat compensation under-reporting. What does this likely mean for you and your S Corps? That Reasonable Compensation challenges will likely occur outside the traditional exam process. A challenge may come from the ongoing Employment Tax Program or the recently launched CIP.
From our polling, we find most tax advisors and their S Corp clients are dangerously unprepared for an IRS reasonable compensation challenge. If you are working with S corps, here’s the news you need to know: (more…)
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Is the IRS Job Aid on Reasonable Compensation Still Relevant?
- July 1, 2022
- Posted by: Paul Hamann
- Category: Blog
Views: 667By Michael Gregory, ASA, CVA, NSA, MBA, Qualified Mediator with the Minnesota Supreme Court
Our guest contributor this month is Michael Gregory. Former IRS Territory Manager and key architect of the IRS Job Aid on Reasonable Compensation shares his wisdom on how the Job Aid has stood the test of time.
IRS valuers identified reasonable compensation as one of the top issues for audit. Differences of opinion by valuers in the private sector and IRS valuers could lead to conflict and disputes on examination, leading to Appeals, and potentially to litigation. This commentary defines reasonable compensation, introduces the IRS Job Aid and Appendix, provides links to some recent IRS papers related to reasonable compensation, introduces how various levels at the IRS look at the issue, provides links to relevant court cases and key factors for consideration from those court cases, and provides a source for contemporary commentary on this topic.
What is reasonable compensation and how is it determined? (more…)
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Adding Compensation Consulting to Your Practice
- June 1, 2022
- Posted by: Paul Hamann
- Category: Blog
Views: 323By Stephen D. Kirkland, CPA, CMC, CFF
You know that your clients may be extremely astute when it comes to manufacturing widgets. But managing business operations is a different challenge. The boards and officers of closely held businesses (and nonprofits) often lack the knowledge needed to appropriately set compensation amounts. Yet this is a vitally important part of running a successful operation. The total dollar amounts deployed for compensation are often one of a business’ largest expenses. And pay may be one of the most sensitive issues from the perspective of their employees. (more…)