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When New Clients Wave Red Flags—2 Signs Your New Client Got 263(a) Wrong

Posted by Don Warrant on 7/22/15 9:07 AM

If you’re onboarding a new commercial real estate client this summer, be sure to check tangible assets on the tax return

tangible_property_regs-4Summer isn’t just about quality time at the pool or the golf course. It’s also about quality networking time focused on growing your practice. Lots of calendar-year taxpayers are coming off of their annual experience with their tax preparers, and some of them are bound to be testing the waters to see if a new accountant might be a better fit. If you’re fortunate enough to be adding clients that own tangible property, especially commercial real estate clients, there are 2 key signs that they may have missed a significant tax-saving opportunity under the new 263(a) regs.
 
1-Does the Return Include a Form 3115?

If your new or potential commercial real estate client has already filed a 2014 tax return, that return should include a Form 3115, Application for Change in Accounting Method. If it doesn’t, the good news is that most clients can still file that form up to the extended due date of the original return. And the even better news is that you will likely be able to help them get a significant refund as a result.
 
2-If the Return Includes a Form 3115, Is There a 481(a) Adjustment?

If you onboard a new client or talk to a potential client who did file a return with a change in accounting method, you need to review that adjustment. The new regs under section 263(a) require affected businesses to change their accounting methods (Form 3115) and to adjust the basis of many existing assets to reflect that change (Form 3115—Part IV, Section 481(a) Adjustment). If you review a return for a new client that includes the change in method but not the adjustment, it’s likely that there is a mistake involved that needs to be corrected before the extended deadline for the return.
 
263(a) opportunities Even if the Form 3115 has been filed and a 481(a) adjustment has been claimed, it’s important to review the previous accountant’s work in calculating the adjustment. The one-time catch up adjustment for businesses that change accounting methods under the new rules has generated more than its share of confusion and errors this year.
 
If you’re looking at new clients that have tangible assets, you might want to consider getting a second opinion on the 481(a) adjustment from CSP360. Our professionals focus on tax issues affecting commercial real estate clients. We have helped many accounting firms that wanted an extra set of eyes on this issue at this critical time. If you have any questions or concerns about how the new rules may have affected your commercial real estate clients or prospects, a consultation with CSP360 could help you to better serve your client.

Tags: 263(a) regulations, tangible property regulations, Don Warrant

Time Is Running Out to Get 263(a) Elections Right

Posted by Don Warrant on 7/14/15 8:59 AM

The Window of Opportunity on These Tax-Saving Elections Closes This Fall

263aThe weather’s heating up. It feels like time for that midsummer lull between the spring tax season everybody knows about and the fall extension deadlines that wreak almost as much havoc on a CPA’s life without the relief of occasional tax jokes from late-night hosts. There’s a big difference this year, though. Any clients with depreciable property on their returns needed to make changes in accounting methods and consider making elections under new regs for their 2014 returns.
 
Taxpayers who already filed their returns can still make changes to those returns to take advantage of the tax saving opportunities or to include a missed election using the automatic extension procedures. Given the scope and complexity of the new rules, it makes sense to take a second look at the returns of your affected clients to make sure that the new rules were followed correctly. With the amount of potential tax savings at stake, you may want to consider having a second set of eyes that are focused on this issue reviewing those returns.
 
Most commercial real estate businesses are likely to see a significant impact from the regs. Given the constant need for repairs, replacements and maintenance on buildings, these clients need to make sure that they have correctly implemented the accounting method changes and claimed the related adjustments. Because the IRS will continue to release guidance this year, CPA firms should continue to consider this an important topic to discuss with clients.
 
If you’re confident that your firm got this complicated compliance initiative right for all of your clients, by all means hit the beach or the mountains or go wherever you need to go to relax this summer. If you’re wondering whether there’s a possibility you may have missed something and you want to consult with a professional who is focused on helping CPAs provide the best service possible to commercial real estate clients, a consultation with CSP360 might make your time off much more relaxing.
 
263(a) opportunities Just remember, the automatic extension procedures don’t close gradually over time and remain open for some people in certain circumstances. This window of opportunity slams shut on the extension date for the original return—either September 15 or October 15 for calendar year taxpayers. If the taxpayer didn’t file a Form 3115 with their 2014 tax return then the taxpayer has effectively made all of the method changes for tangible property without the benefit of a tax deduction. That is most likely not the best option for the taxpayer. Similarly, if the taxpayer filed a Form 3115 with their 2014 tax return reporting a $0 Section 481(a) adjustment, they have not taken advantage of the tax savings opportunities and may not have complied with these regulations. Now is the time to fix those returns if necessary.
 
These normally quiet months for tax practitioners can be a critical time for some clients. If you have any questions or concerns about how the new rules may have affected your commercial real estate clients or prospects, a consultation with CSP360 could help to put your mind at ease.
 

Tags: 263(a) regulations, tangible property regulations, Don Warrant

Post Tax Season 263(a) Opportunities to Get New Clients from Competitors

Posted by Don Warrant on 5/22/15 9:03 AM

Don’t let competitors use a letter like this to steal your clients.

Most accountants spend the end of April and early May catching their breath and letting the dust settle from the spring filing season. Once you’ve cleaned up and started planning for the summer, remember that there’s a very rare opportunity this year related to the 263(a) tangible asset rules. Taxpayers who timely filed their 2014 federal tax returns receive an automatic extension of time to amend their tax returns to file Forms 3115 and make late elections.
 
Most commercial real estate businesses are likely to see a significant impact from the regs. Given the constant need for repairs, replacements and maintenance on buildings, these clients need to make sure that they have correctly implemented the accounting method changes and claimed the related adjustments. Because the IRS will continue to release guidance even after the filing season has ended, CPA firms should continue to consider this an important topic to discuss with clients. For example, the rules on building refresh’s are still evolving and IRS guidance is expected anytime.
 
You may very well be on top of things and maximizing any 263(a) opportunities for your clients. On the other hand, if you are behind the curve, you’ve opened up a tremendous window of opportunity for a more aggressive competitor to poach clients.
 
Given the complexity of these rules and the fact that significant pieces of guidance have yet to be released, the next few months are a great time for your firm to aggressively reach out to potential clients about their 263(a) opportunities. For example, if they already filed, explain how you can help them capitalize on a missed opportunity under the automatic extension procedures. If they are on extension, then their current tax preparer may not have pinpointed the tax savings opportunities, carpe diem (seize the day)!
 
Here’s what that letter from an aggressive accounting firm to your client might look like.

263a

We’re pretty sure that you would be very displeased if one of your clients got a letter like this, but your clients are fair game for firms that can deliver more tax advantages from an opportunity with an ever closing window.

This opportunity to amend 2014 tax returns under the automatic extension period might be missed by other tax return preparers. But it’s also an opportunity that some of your competitors may seize if you don’t.

If you would like to evaluate your clients’ plan to comply with the new rules for tangible property, we can help. Contact us to schedule a consultation.

For more on this topic, be sure to download our whitepaper, “Using the New Tangible Property Regs to Help Clients and Gain New Business

Tags: 263(a) regulations, tangible property regulations, Don Warrant, accounting method changes, Form 3115

3 Ways That CPA Firms Are Going to Lose Clients Because of 263(a) Compliance

Posted by Don Warrant on 1/6/15 9:14 AM

Ignore these tax-saving opportunities at your peril!

263(a) Compliance OpportunitiesIt’s a scenario that haunts every CPA. The controller of your largest client returns from a CPE session and says, “I just heard about this great tax-saving strategy. Why didn’t you tell me about it?”

 
This tax season, CPAs who ignore the implications of the tangible property regulations are likely to see that scenario play out over and over again.
 
Here are a few of the ways that we believe CPA firms could potentially lose a client as a result of 263(a) compliance:

  • You were late to the “late partial dispositions” party. The final tangible property regulations allow building owners to take a current deduction on the disposition of any structural component that has not been fully depreciated—including, for a limited time, structural components of buildings that were disposed of in prior years. In fact, after you file your client’s 2014 tax return, the “late partial disposition” for building components disposed of in prior years is gone forever. If you fail to take advantage of this one-time opportunity to accelerate tax deductions into the 2014 tax year, and your client becomes aware of that oversight, perhaps resulting in additional taxes paid in a future year when the property is disposed of, then your client relationship could be jeopardized.
  • You missed de minimis. Imagine your client’s horror if he discovers from an IRS examiner or competitor CPA firm that he could have been writing off all amounts paid to acquire, produce or improve tangible property based on his book capitalization policy but you failed to make that election! CPAs who fail to make their clients aware of this new de minimis safe harbor could jeopardize their client relationship or lose the client to a competitor.
  • You left your small taxpayers exposed. It’s not easy being small. Especially when it comes to complying with complex tax requirements. That’s why the Treasury Department created the small taxpayer safe harbor—to simplify their compliance with the rules regarding building property. Imagine the displeasure of a client who pays for a complete 263(a) repairs vs. improvements study, only to discover that she could have written off all costs related to the building property free and clear simply by making an election!
cost segregation guide for CPA firms These scenarios don’t have to play out in your firm. Establish a strategic partnership with tax, accounting methods and engineering specialists who will make sure that you are taking advantage of every opportunity to save your clients money and keep them in compliance with the tangible property regulations. Contact us to learn how CSP360 can help you help your clients.

Tags: cost segregation, 263(a) regulations, tangible property regulations

Telling Clients About Your (GASP!!!!!!) Fees for 263(a) Compliance

Posted by Jennifer Birkemeier on 12/30/14 9:48 AM

Hear that noise? That’s the collective intake of breath from property owners all over the U.S. when they hear estimates for 263(a) compliance... but there may be some good news, too....

Partial Property DispositionYour role as a tax practitioner is to make sure your client has complied with all applicable Internal Revenue Code and Treasury Regulations. And due to the final tangible property regulations, that compliance work will require significantly more time and expense this year than your clients might be expecting—anywhere from tens to hundreds of hours per client.
 
Why is the compliance load so burdensome with this round of regulations? In a word: documentation. In addition to the significant investment of time to understand these complex regulations, the IRS is expecting all taxpayers that own or lease buildings to file at least one Form 3115 for method changes required to comply with the new regulations impacting building property. Otherwise, the taxpayer must show why such method changes weren’t required for their building property. As a tax return preparer, your professional standards for tax return preparation require that you document your client’s compliance with these Regulations to avoid potential preparer penalties.

The Good News: The Spoonful of Sugar That Will Help the Medicine Go Down!

The good news is that most commercial building owners are eligible for method changes and elections that will result in federal tax deductions. And those onerous and time-consuming Forms 3115 will protect those tax deductions in the event the IRS examines your client’s tax return. 
 
So, to fulfill your own professional standards and to demonstrate to building-owning clients the benefits of compliance, tax return preparers should discuss (and clearly document the results of those discussions) each of the following tax-saving opportunities from the tangible property regulations:
 

  1. De minimis. Making this safe harbor election allows your clients to write off amounts paid to acquire, produce or improve tangible property—up to $5,000 per item or invoice for clients that have an Applicable Financial Statement and follow written accounting procedures ($500 for clients without an AFS). In addition to reducing taxable income, this safe harbor will protect amounts expensed in the event of an IRS examination.
  1. Small taxpayer safe harbor. This safe harbor, which is made on a building-by-building basis by eligible small taxpayers, also serves to reduce taxable income and to protect all amounts expensed from IRS examination. The total expenditures for the year for each qualified building may not exceed the lesser of $10,000 or 2% of the original cost of the building. If total expenditures for amounts paid to maintain and improve the building for the year exceed this limitation by any amount, the safe harbor is not applicable for that building.
  2. Dispositions. The “late partial disposition” election, which allows a tax deduction for portions of building property disposed of in prior tax years, is only available for the 2014 tax year. So use it or lose it!
  1. Improvements to tangible property. Many building owners have unknowingly capitalized repairs in prior years that now can be expensed. The identification of capitalized repairs is based on the new unit of property rules, which the regulations have defined as the building and its structural components, and eight specific building systems. A new three-part test is applied to each unit of property to determine whether the amount is a deductible repair.
tangible property regs Failing to identify and make elections and/or method changes that will reduce or eliminate your client’s income tax liability and protect your client’s expenses from IRS examination could have repercussions if examined by the IRS or a competitor. Therefore, best practice is to identify those elections and method changes that are applicable and document your client’s decision—whether or not those elections and method changes will be made. It is likely that such elections and method changes will substantially reduce your client’s costs to comply while you satisfy your professional standards as a tax return preparer.
 
Need help identifying opportunities to lower your clients’ tax bills while also bringing them into compliance? Read our guide to using the tangible property regulations to help clients and gain new business.

Tags: 263(a) regulations, tangible property regulations, Jennifer Birkemeier, Late partial dispositions, Form 3115

Complying With The Tangible Property Rules

Posted by Don Warrant on 10/21/14 9:17 AM

Don’t let them be fooled into thinking a repairs and maintenance review equals compliance.

There’s a reason that every CPE session you’ve attended in recent months has addressed the tangible property regulations. Compliance with this complex set of rules is mandatory for the 2014 tax year. If your client is not in compliance, and therefore understates taxable income, you as the tax preparer are on the hook for stiff penalties—not to mention the potential loss of a client.

But bringing your client or a prospect into compliance entails a significant amount of your time, not to mention specialized expertise regarding method changes. So how do you convey the importance of complying with these voluminous rules so that those clients are willing—even happy—to pay you for the extensive time that will be required of you?

Following are four things that clients and prospects need to know about 263(a) compliance:

  • 263(a)_compliance“There’s gold in them hills.” While compliance with the tangible property regulations can be an arduous climb, a thorough review by tax and engineering experts can pay for itself by mining opportunities to take current deductions for repairs and dispositions of tangible property.
  • A repairs and maintenance review is not enough. Your clients should know that any report that merely identifies deductions, with no “givebacks” in the form of additional capitalized costs, is unlikely to address the client’s full compliance responsibilities. The tangible property regulations consist of five sections, each of which entails required method changes, as well as optional elections. Identifying previously capitalized costs that are now eligible for current deductions comprises only one-half of one method change (out of a total of 27).
  • That capitalization policy is a good start, but it’s still not enough. Some clients are under the impression that they complied with the new rules when they put in place a capitalization policy last December. While necessary to adopt the de minimis election, the capitalization policy does nothing to address the many other components of this substantial body of regulations.
  • Engineering knowledge is not enough. True compliance with the tangible property regulations requires a combination of deep knowledge of this nuanced area of the tax code. While firms that specialize in cost segregation may sing an alluring tune of tax savings, they may not have what it takes to make sure the clients’ 263(a) compliance requirements are met.

Of course, simply telling your client or a prospect what doesn’t constitute compliance is not going to give you the opportunity to help them with these complexities, and in the process, earn additional revenue. That’s why you need to present clients and prospects with a carefully thought out plan regarding the applicable method changes and the potential impact on their 2014 tax liability. Armed with that comprehensive plan—which most likely will include some tax-minimization opportunities—you will demonstrate that you are looking out for his best interests.

tangible property regs Backed by the expertise of Top 100 accounting firm Freed Maxick, CSP360 partners with CPA firms across the country to bring their clients into compliance with the tangible property regulations and identify opportunities for tax minimization. Contact us to learn how we can help you deliver the highest level of value to your clients.

Tags: New Tangible Asset Regs, 263(a) regulations, Don Warrant, tax saving opportunities

How to Quote a 263(a) Project to a Client or Prospect

Posted by Don Warrant on 10/14/14 9:09 AM

To bring clients tax minimization opportunities and get them into compliance, build in enough time to fully test assets and expenses.

263(a)By now, you know that every one of your clients and prospects must comply with the tangible property regulations for the 2014 tax year. But uncertainty about what exactly that compliance project will entail may have kept you from quoting these 263(a) projects.

Ideally, every CPA should start bringing clients and prospects into compliance as soon after the October 15 tax deadline as possible. Every day you delay starting the process will make the 2015 tax-time crunch more onerous.

Some overwhelmed CPAs might be tempted to think that, because a boutique cost segregation provider has performed a review of fixed assets to identify deductions, the compliance problem has already been taken care of. This is a dangerous assumption. These boutique providers are adept at combing through the fixed asset schedule to pick out costs that were previously capitalized and now are eligible to be expensed. But when it comes to identifying costs that were expensed and now must be capitalized, those providers lack the tax expertise (and motivation) to perform that analysis.

Make no mistake; a fixed asset review is not enough to bring your clients or prospects into compliance with the tangible property regulations. As the signer of your client’s tax return, you need assurance that the client is fully in compliance with the tangible property regulations.

Unless your client’s engineered tax solutions provider also comes to the table with deep knowledge of tax law and method changes, you will need to build into your quote many hours of your own time to examine and analyze the impact of these complex regulations.

What You Need to Do to Bring Clients Into Compliance

When it comes to your more complex clients and prospects who own multiple commercial properties, the hours required for a 263(a) compliance project can really add up—in some cases to a hundred hours or more. The project essentially consists of three phases:

Phase 1—Information Gathering

During the initial information-gathering phase, you perform a preliminary assessment of the extent of the regulations’ impact for each of the five primary sections of the regulations (materials and supplies, de minimis amounts, amounts paid to acquire or produce tangible property, improvements to tangible property, and dispositions).

This analysis requires access to both the fixed asset schedule and the general ledger. What you’re looking for is any large dollar amount that is likely to jump out at an IRS examiner. For example, you’ll want to flag for further analysis any asset on the books with a high net tax basis, such as buildings and leasehold improvements.

Once you have a list of these high-dollar assets and expenses, ask the client or prospect for more information about exactly what type of work was performed. Based on their answers, you should have enough information to identify the method changes that your client will be required to perform, as well as those elections that will save the client money.

This analysis—which can take anywhere from a couple of hours to a couple dozen hours—is necessary before you can accurately quote a fee for the second and third phases of the project. Without this information, you’re really just guessing which of the regulations’ 27 method changes and 7 elections applies.

Phase 2—Analysis

Based on the information gathered in Phase 1, perform tests on those fixed assets and expenses to generate the depreciation amounts and deductions that you will use in your client’s 2014 tax return. Also during this phase, you will prepare Forms 3115 to report method changes. Documentation is critical during this phase to support your position in the event of an IRS examination.

Phase 3—Incorporate method changes

During the final phase of the 263(a) project you assist the client or prospect with updating internal accounting procedures in accordance with these method changes and their own capitalization policies.

A Comprehensive Compliance and Tax Minimization Solution

Overview-of-Annual-ElectionsAnnual_ElectionsBringing clients into compliance with the tangible property regulations is no simple endeavor. An accounting methods specialist will be best positioned to determine which of the 27 method changes is applicable. CPAs who trust that their clients’ boutique providers of engineered tax solutions have the compliance angle covered may be in for a rude surprise when the IRS starts reviewing those tax returns in 2015 and beyond.

Overview-of-Automatic-Method-ChangesBacked by Top 100 firm Freed Maxick, CSP360 provides CPA firms access to deep expertise in tax and accounting methods combined with practical engineering and construction cost knowledge. Contact us to find out how we can help bring your clients fully into compliance with the tangible property rules while also digging deep for tax minimization opportunities.

Tags: 263(a) repair and maintenance review, 263(a) regulations, tax saving opportunities

3 Things to Tell Clients About Tangible Property Regulations

Posted by Don Warrant on 9/9/14 9:37 AM

Lead with tax savings on past repairs and maintenance, and close with ways to minimize taxes in the future.

Section_162(a)As a CPA in touch with your commercial real estate client base, you know that the final tangible property regulations represent significant opportunities to uncover tax savings for those clients while bringing them into compliance with IRC Section 263(a) and Section 162(a).

We CPAs tend to get so excited about these opportunities that we sometimes get a little “geeky” about the regs. But the fact is that clients really don’t care about all the minutiae of tax law. All they care about is how they can save money on their tax bills, increase their cash flow, and do it without Uncle Sam slapping them with penalties and interest.

With those goals in mind, here are the three most important things you should tell your clients about the tangible property regulations:

  1. Tax savings could far exceed the costs of compliance. Telling a story of tax-minimization is sure to make your clients’ eyes light up. The Treasury expects every taxpayer with fixed assets to conduct a review of their accounting for tangible property and file at least one Form 3115 with their 2014 return. But rather than lead with a dreary tale of compliance, talk up the tax savings. Review the client’s fixed asset schedules now to identify those repairs they were previously capitalizing. And while you’re at it, take a look at opportunities to accelerate depreciation deductions.
  1. 263(a) and cost segregation go together like peanut butter and chocolate. For commercial property owners, the first step in complying with the tangible property regulations is to segregate out the eight building systems from the building and its structural components. Clients that have already had a cost segregation study performed are that much closer to 263(a) compliance and identifying opportunities to deduct repairs that were previously capitalized. For clients that have not benefited from a cost segregation study in the past, now might be an ideal time to do so. The engineering analysis required for a cost seg is the same as that required under the 263(a) system break-out, so why not take that extra step of identifying 1245 property that qualifies for accelerated depreciation?
  1. These rules provide a roadmap to future tax savings. Now that we have final rules defining unit of property and tests for repairs vs. improvements, you can help your clients plan their future renovation activities so that they qualify as deductible repairs.

CSP360 Deep Dive Program Remember: These are just the highlights. The final tangible property regulations contain a plethora of opportunities to deliver tax-saving value to clients while bringing them into compliance. Taking advantage of these opportunities requires engineering expertise. If you are interested in partnering with CSP360 to help improve your clients’ current and future cash flow, contact us to request a Deep Dive into our process.

Tags: 263(a) regulations, Don Warrant, Section 162(a), tax savings from repairs vs capitalization

5 Questions to Uncover a 263(a) Opportunity

Posted by Don Warrant on 8/26/14 9:21 AM

Clients with $500,000 or more of capitalized improvements, old assets on the books are prime prospects for tax savings.

263(a)As your clients’ trusted advisor, you are constantly searching for opportunities to lower your clients’ tax bills while keeping them in compliance with IRS Regulations.

A fixed asset review is an ideal way to accomplish all of the above. We discussed the benefits of a mid-year fixed asset review in a previous post. But how do you identify those clients that represent the greatest opportunities to realize tax savings while complying with 263(a)? Here are five questions you should be asking.

  1. Does the client own properties that require frequent or expensive repairs? Hotels, restaurants, commercial office buildings and retail establishments all must keep the property in good condition to attract clients and customers. Manufacturing and distribution facilities require expensive repairs to keep a unit of property in efficient operating condition. These are exactly the kinds of clients and prospects that have costs that are likely to qualify as deductible repairs.
  2. Does the client have more than $500,000 of capitalized improvements on the books? A commercial property owner can look back all the way to 1987 for capitalized costs so it’s not hard to reach that number. By proactively reviewing previously capitalized costs, you can demonstrate your value by identifying costs that now qualify as current tax deductions. And by performing that review now, you can present your client with the option of taking those deductions on the 2013 tax return or saving them to offset 2014 taxable income.
  3. Is the client depreciating old windows or roofs? The proposed regulations allow taxpayers to claim a tax deduction for the retirement of structural components of buildings—or any portion of a structural component. The clock is ticking on your ability to make this “late partial disposition election” for assets disposed of in prior years. The election is currently available only for the 2013 tax year. While the final regulations (which are yet to be released) are expected to extend the election to 2014, cover your bases by cleaning up property owners’ depreciation records now.
  4. Could your client benefit from the de minimis safe harbor? This safe harbor allows taxpayers to write off any amounts paid to acquire, produce or improve tangible property that are less than a certain threshold. For taxpayers that have an Applicable Financial Statement (AFS) and follow written accounting procedures, that threshold is $5,000 per item or invoice; for taxpayers without an AFS, the threshold is $500 per item or invoice. Because the final regs removed the ceiling on this election, your clients and prospects now have a significantly greater opportunity to shield these tax deductions from IRS scrutiny.
  5. Has the client purchased, constructed or renovated a building with a cost basis of at least $1 million? Compliance with the tangible property regulations is mandatory, but if you can find opportunities to accelerate depreciation deductions at the same time utilizing a cost segregation study—that’s just gravy!

CSP360 Deep Dive Program If you’re looking for ways to increase your clients’ cash flow while putting them into compliance with 263(a), CSP360 can help. Sign up to take a Deep Dive and find out how.

Tags: commercial real estate, 263(a) regulations, Don Warrant, tax saving opportunities

CPA Firm Growth Opportunity: Real Estate, Cost Segregation Markets Heat Up

Posted by David Barrett on 6/12/14 9:07 AM

Higher percentage of Top 100 accounting firms see revenue growth from cost seg services.

cost_segregation-1Accounting Today Top 100 firms are realizing the top-line benefits of offering cost segregation services. Is it time for your firm to explore this opportunity to grow revenues and delight clients and prospects?

In the 2014 survey, nearly half of responding firms saw increased revenue from cost segregation, up from roughly 40 percent of firms in each of the past two years’ surveys.

Correspondingly, industries that have the most potential to benefit from cost segregation studies – real estate , construction,and manufacturing - are now among the top niche practice areas. That’s great news for firms looking for more growth via engineered tax opportunities.

  • Nearly 80 percent of 2014 Top 100 firms saw increased business from real estate clients, bumping the niche to third on the list of top client segments, up from fifth in 2013.
  • Construction moved up 14 percentage points to 66 percent of responding firms, putting it sixth on the list of top client categories, up from eight in 2013.
  • Manufacturing businesses continue to drive growth for the largest percentage of responding firms, with just over 80 percent saying that their firm is increasing business within that industry.

What’s driving the trend?

A confluence of factors is driving the opportunity for new revenue for CPA firms via cost segregation.

First, the final tangible property regulations have turbocharged the value of a cost segregation study. By combining a cost seg study with a 263(a) repair and maintenance review, clients can potentially double their tax savings. That’s a great story to bring to clients and prospects!

Are you aware that clients for whom your firm has performed a cost segregation in the past are ideal candidates for a 263(a) review? Since a portion of the heavy lifting was already completed during the initial cost seg study, the client will see a lower overall cost of 263(a) compliance.

Second, the value of commercial real estate is beginning to recover. As wealthy individuals and businesses increasingly look to acquire and improve commercial properties, CPA firms that can demonstrate their ability to lower those property owners’ tax bills will maintain and build their competitive advantage.

Open the door with commercial real estate owners

cost segregation guide for CPA firms Cost segregation provides the perfect door opener with growth-oriented business owners. And once that door is open, you have easier access to additional corporate and personal tax services, or even the annual audit.

Think about it. Once you’ve demonstrated your firm’s ability to deliver tens or even hundreds of thousands of dollars in tax savings through cost segregation and tangible property reviews, clients are likely to be receptive to other tax-minimization opportunities, from 179D to location based credits and incentives.

Recognizing hot trends is one thing. Being in a position to take advantage of those trends requires access to the right expertise and tools. Learn more about the 5 Key Lessons for Integrating Cost Seg Studies into Your Firm’s New Business Program.

Tags: cost segregation, 263(a) regulations, tangible property regulations, David Barrett

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