As a CPA, when considering real estate tax strategies for your clients, you may be wondering which clients warrant a formal fixed asset review outside of the efforts made by your firm or your client when maintaining annual tax depreciation.
As you consider outsourcing fixed asset review work to a tax consulting firm, keep the following questions in mind:
Do your CPAs maintain clients’ fixed asset depreciation?
Deprecation is an important, but sometimes overlooked, aspect of the tax return preparation process – sometimes CPA firms are involved in that process and sometimes they’re not and the answer may vary by client. Many times with smaller or less fixed-asset-intensive clients, the client does the work, sending everything to the CPA for a cursory review before signing off on the tax return. It’s easy to see the potential exposure or missed opportunity that may result from this practice. As the complexity increases, and perhaps the more tax liability a client has, the more intricate and imperative fixed asset management becomes. Most clients, and many CPA firms, simply do not possess the internal bandwidth or experience to unearth and substantiate every deduction. It’s important, and the consideration will be different in every situation, to find the point at which outsourcing to a tax consulting firm that specializes in fixed asset management is most beneficial.
Where does the tax consulting firm fit into your process?
For complex facilities, or for a client that owns a portfolio of properties, a wealth of experience in both tax guidance and engineering is needed to correctly quantify and categorize fixed assets and validate every cost segregation opportunity.
When partnering with a tax consulting firm, the first order of business should be to identify and focus on your clients that are the most fixed-asset intensive. These are clients with the most fixed asset additions related to real estate acquisitions, new construction and renovations projects, and the acquisition of tangible personal property year over year. These clients should be provided with additional assistance in reviewing and managing their fixed assets to maximize the allowable deductions.
What about implementation?
Often, cost segregation specialists will provide your CPAs or clients with the results of a fixed asset review or cost segregation and consider their role as complete. However, there can be a considerable effort remaining to implement the results. And, oftentimes, the output provided has not taken state, local (property tax) or AMT into consideration.
Ensure your tax consultant is capable of carrying out the implementation with the following in mind:
- The deliverables are formatted for easy implementation in FAS so your CPAs’ and clients’ burden is minimized;
- The tax consultant is available to educate your CPAs and clients as to the level of detail they should use and the mechanics of making adjustments within their fixed-asset system, as needed; and
- The tax consultant is capable of making all of changes or providing an updated fixed-asset database for easy upload into your system, if desired.
Each step of the way, your CPAs should never feel like they’re without a trusted advisor, including implementing the results of a fixed asset review or cost segregation.
Ready to learn more about outsourcing fixed asset reviews for your CPA firm’s clients? Download your complimentary, educational cost segregation guide.
