With taxes being one of life’s two certainties, accounting has a measure of job security that’s lacking in every profession but mortuary science. There will always be someone looking for a legal loophole or a hapless tax filer who doesn’t know how to sort through his shoebox filled with receipts and statements.
Still, the enormously complex Taxpayer Relief Act of 1997 provided a welcome injection of activity into many accountants’ practices. Enacted into law last summer, the act contains some 800 provisions, many dealing with matters integral to individuals’ financial lives, such as retirement investing, saving for college, and how much profit homeowners can take tax-free from the sale of their residences.
One feature of the act–the rules for taxing capital gains–really drove taxpayers to seek help from accountants and other professionals on how to file their income taxes this past April.
“Since so many people now own mutual funds and stocks, the capital gains issues affected a lot of people,” notes Dennis Kroner, a certified public accountant at Pitt, Ryan & Linnear, Chicago.
Indeed, the tax act included a hodgepodge of rules on the rates at which stocks or other assets sold at a profit would be taxed. Early last month, however, Congress cleared up the confusion with simpler capital gains rules under the IRS reform act.
Melvin I. Goodman, a Glenview CPA, predicts next tax season will be quieter as a result.
However, the Taxpayer Relief Act brought many accountants, especially those in small firms who cater to individuals and entrepreneurial businesses, new clients who will continue to seek advice.
Kroner, for instance, says he will serve many of the clients who first walked through his door last tax season with financial planning services. He sees fewer people coming back for simple tax preparation, though.
“The average taxpayer can now buy software for $29 that will help him prepare his tax return,” Kroner explains. “I think the future opportunities (for accountants) are going to be less with tax preparation and more with value-added services such as financial planning.”
The bevy of retirement planning and other provisions in the Tax Relief Act have prompted many individuals to seek more comprehensive financial advice, Kroner adds.
A recent study conducted by the American Institute for Certified Public Accountants (AICPA), a New York-based trade group, echoes Kroner’s prediction. “We have conducted a `20-20 Vision’ project, which looks at what the profession will be like in the next century,” explains Phyllis Bernstein of the AICPA.
“Financial planning will be one of the core services that members of the profession will be involved in.” The trend is already in evidence, she notes. A recent poll showed about 90,000 AICPA members are involved in providing financial planning advice, up from 60,000 a couple of years earlier.
The Tax Relief Act targeted middle-income families with tax breaks for education savings and retirement investing, but these middle-income households traditionally steer away from planning advice from accountants or other professionals because they can’t afford to pay hourly fees of $75 or $100.
But in another twist, some high-priced firms are finding ways to reach the mass market. Most of the individuals served by the private client services group at the accounting firm of Arthur Andersen, Chicago, are in the upper income brackets, notes Amy Coleman, a manager in the group. However, employers have begun hiring the group to provide financial planning seminars for their workers. “We have done some programs where there is telephone support,” explains Coleman. “After the seminar, employees have the option of calling an 800 number and talking to a counselor about their concerns. And some companies offer workers discounted rates on hourly financial planning.”
The tax act also contained enough provisions affecting high-end individuals to prompt them to seek more comprehensive planning services from their accountants. Cary Buxbaum, a CPA and partner in the Skokie firm of Frost, Ruttenberg and Rothblatt, reports that clients are coming to him for estate planning, which has been affected by an upwards revision in the tax-free amounts individuals can pass on to their heirs.
Also, provisions dealing with the alternative minimum tax have prompted executives who receive stock options to seek out an accountant, says Buxbaum.
And the new Savings Incentive Match Plan for Employees or SIMPLE retirement plan created by the new tax law is bringing some small business owners to their accountants. “There was especially interest in the (SIMPLE) plans by clients who didn’t have retirement plans in place already,” notes Ron Lewis, at Berg, DeMarco, Lewis, Sawatski & Co. in Northbrook.
Bernstein of the AICPA concludes that the burgeoning number of accountants providing financial planning is “partly a result of the new, complicated tax law. It’s also a result of life being so much more complicated.
“People don’t have time to focus on everything they need to and they must hire a professional.”
