I cancelled pre-election tax planning offers

Tax planning has always been a larger part of my practice than tax return preparation. That means that this is my busy season. I offered a number of fixed fee tax consultations under assumptions that the 2017 tax code will be basically the same as this current year. Now that seems unlikely. There are suddenly hundreds of billions of savings potentially available to individuals who position themselves to take advantage of the possible scenarios.

I debated this in my head over the weekend and finally decided: new playing field, new ball game. So today I sent out this email to prospective clients:

“Earlier this year I extended an offer to help with year-end tax planning. According to my records you have not yet accepted that offer and we have not scheduled any time for that work. Last week an unexpected event in national politics triggered an unprecedented increase in demand for tax planning consultations. As a result, I must adjust my scheduling and change my pricing formula in reaction to this new situation.

This message is to advise you that I am withdrawing the engagement offer but will be willing to reschedule and re-quote the work at a different time.”

I regret turning away and possibly losing any new business client, but believe this is best in the big picture. Tax planning for 2017 and beyond is suddenly an entirely different service than was originally anticipated.

I will honor the few offers for other types of accounting services made prior to last week.

Initial inquiry about a private pension plan

Last night I received an anonymous post on my web site that says “I am a self-employed… with income of $1 million after deductions. I am looking to find a tax deductible retirement plan that can help me reduce my tax liability. I looked in to IRA and Roth IRAs but my income is too high and I won’t be able to deduct the contributions made to the IRA. I don’t understand the target annuity pension plans for small business under IRC 412(I). Can you explain in simpler terms?” Of course I can’t verify any of this and I cannot continue the conversation. But the question is interesting enough to trigger this blog post as a response.

A high income self-employed person should certainly consider a private pension plan as a tax planning strategy. These can generate huge tax deductions – perhaps more than a half million dollars under some circumstances – but this is dependent on the actuarial facts that we do not have available in this question. The point is that it would make sense to spend an hour or two to explore what is possible.

It is unlikely that a pension plan known as a “412(i) plan” would be the top choice in this scenario. I suspect that the question is posed this way due to a Google search that led to an article I wrote on the topic. But there is no reason to presume, at this point, that the options are so limited.

The process to continue this type of compensation and tax planning is to enter an engagement for tax planning consulting work, perhaps at a cost of about $500. That might seem like a lot for an initial inquiry until we understand what goes into that part of the pension planning process.  The fee would likely cover my work as well as the initial work of an actuary, a pension firm and, if necessary, an initial conversation with a tax attorney who specializes in private pensions. We would first have a discussion to draw out more information about the business and personal circumstances that may have an effect on a pension plan’s operation. I would then consult with an actuary to help establish the limits of what is possible under tax code and then prepare a range of proposals. We would then discuss the options to see if any are attractive. That normally concludes the planning work.

If an option is selected that calls for me to provide additional services to execute and continue to advise the operation of a pension plan then that would be provided under a new agreement.

While it is generally not a good idea to make assumptions, the tone of this message leads me to believe that there are other accounting and tax topics that should be discussed to achieve overall best results. The very fact that a high income wage earner is surfing the web and posting an anonymous question seems to suggest that a trusted advisor relationship is lacking. I am frequently amazed at how many very successful business people have managed to get so far without building a relationship with and accountant/advisor who can make the process on issues like this so much easier.