An experienced tax planner will tell you that you can put together the best techniques, angles, and methods for creating a tax plan, but none of it will matter without implementation. If you create the ultimate money-saving tax plan, hand it off to your client, and they fail to take the next steps, that plan won’t save them a dollar. What is the solution here?
Tax planners have several different options when it comes to implementing tax strategies. Rather than taking a DIY approach where you hand the plan off to the taxpayer and hope for the best, we recommend some combination of these two options: handling the implementation yourself and incorporating that into your fee or enlisting the help of specialists to take care of various aspects of implementation.
What is Implementation?
Implementing a tax plan is a form of strategic execution—you will use processes, systems, or a series of decisions to clarify the taxpayer’s goals and define steps the company needs to take to reach those goals. You can start by providing the taxpayer with a questionnaire to determine what their priorities are. Are they trying to get out of debt? Are they saving for a child’s education or their own retirement? Are they paying off a mortgage? This helps you prepare for the first step of strategy execution:
Step 1: Strategy Creation. Before you can know what implementation will look like, you need to create the tax strategy. For instance, as you are talking to a client, you might notice an opportunity to save money by creating a C corporation. Take note of ideas as they come up to incorporate into your strategy.
Step 2: Create a Plan for Implementation. Once you have collected all the information you need, you can form a cohesive tax plan. As part of this plan, you will need to outline the steps to execute on the strategy and achieve actual savings. This may include finding supporting documentation to establish your strategy, such as contracts, payroll, and record keeping systems. Remember, if you can’t prove that something is true with a paper trail, then it does not exist in the eyes of the IRS. This process may also include legal needs, such as entity formations, creating trusts, setting up bank accounts, or transferring ownership of certain assets. Lastly, your strategy may require working with specialists, such as actuaries, engineers, real estate experts, or bankers. These contractors can help you execute on sophisticated aspects of our tax strategy that may not be in your realm of expertise or within your legal ability to handle.
Step 3: Coordinate Business Operations. This means being familiar with how the taxpayer is operating their business. Who are the key players on their team? Who can be resourceful to you in helping to implement the tax plan? How are they doing their books and records? How do they communicate with their accountant? Do they have paper invoices that come in or is it all electronic? These are really helpful pieces of information when it comes to implementation. The best implementation strategy is going to be something that dovetails nicely with the business’ existing processes and operations.
Step 4: Monitor the Performance of the Strategy and the Team. Once you have set up those initial processes for anything new, you will have to rely on the team for execution—unless there are items that you offer as a service within your tax practice. For instance, let’s say we established a new C corporation. We may initially set up some prorations to allocate funds to operational expenses like rent, payroll, utilities, and supplies. After that, the ongoing posting of payments will be up to the client. If they need assistance, you might consider including that in your maintenance plan, but that’s the dividing line between implementation and ongoing monitoring of the performance of the strategy and the team.
Step 5: Test and Adjust the Strategy. Engaging your client in a proactive tax strategy enables you to monitor the performance of that strategy and change it as needed. This ensures ultimate savings at compliance time when you determine what the savings has actually been. Each tax professional has to make the decision on whether they are willing to push for a proactive approach. Some clients may not want to invest the time and money required, but by drawing that line in the sand, you can free up your time for clients who are a better fit for you and who you can ultimately provide with greater savings.
Without a strategic execution plan, your tax strategy may be nothing more than a list of tasks hanging in limbo because “someone else” was supposed to tackle it. Deadlines will quickly pass, and so will the opportunity to reduce your client’s yearly tax bill. However, with some advance planning, you can formulate an implementation plan that helps you avoid these missteps. At the end of the day, implementation is simply the process of coordinating, organizing, and following up on tasks to make sure everyone involved is taking the needed steps.
To learn more about creating an effective implementation plan for your tax strategy, become a Certified Tax Planner today.
