Growing Your CPA Practice with Specialty Tax Services: How to Use Data Mining, Technology and Innovation to Identify Prospects

What if there were the opportunity to increase your firm’s revenue while adding tremendous value to your clients? The truth is, many of your clients qualify for valuable tax credits and deductions that can help them improve cash flow and reinvest in their businesses. In our experience, we have found that many CPA firms sell themselves short by not offering specialty tax services at all, or not to their full potential. With that said, how can firms recognize which clients are candidates for specialty tax incentives?

Related E-book: How to Grow Your CPA Practice with Specialty Tax Services

In our experience, many CPA firms are surprised at the number of candidates that exist right in their firm’s database. Some industries are more obvious than others. For example, real estate owners have opportunities for cost segregation studies with pending transactions, just as manufacturers are good candidates for R&D tax studies. Would it surprise you to know that businesses in the food services and medical device industries can also qualify? Far too often, longtime clients are overlooked and overall, CPA firms simply don’t have the time or tools to look into these opportunities.

Simply put, data mining refers to automated searches using client data stored in software to gain business insights. For example, some CPA firms look for Schedule C sole proprietors that could benefit by reorganizing as an S corporation. For the purposes of tax incentives, data mining refers to the process of conducting an audit of your tax returns to uncover opportunities to generate substantial income for your CPA firm. Auditing the entire client list is an essential part of the process, so it is essential to have buy-in from all of your partners. Large firms may hire data scientists to conduct data analysis.

Other firms recognize the need to embrace opportunities and cull opportunities from their data, but don’t have the in-house expertise or time to do so. That’s when a specialty tax partner can be an asset to building new opportunities. Data mining is critical because it identifies business opportunities within your firm’s database that would otherwise not be noticed.

The ETS Data Mining Approach

Because ETS is singularly focused on specialty tax services, we can spot patterns using your tax software—opportunities that translate to significant dollars at low cost with minimal time invested. You can rest assured that your clients’ confidentiality remains protected as we never see names, only numbers.

Let’s use cost segregation as an example. Our goal is to mine your tax software to look for depreciated assets with 27.5- and 39-year terms. Here is how the process works:

  1. Your administrator runs the initial report.
  2. ETS performs a quick and easy audit of all your current client files.
  3. From the audit, we identify depreciation schedules that indicate real estate holdings.
  4. Lookback rules enable accelerated depreciation for projects beginning in 1987 to be accounted for in the current year. ETS generally looks back 10 years to capture savings.
  5. Using the schedules, we generate a benefit analysis for each one to identify the estimated tax benefits your clients could anticipate from a cost segregation and/or energy certification program.
  6. Once clients are identified, a plan is implemented to reach out to them to explain the benefits of the tax incentives.

It might surprise you that this entire process takes one week. Using this data mining process, you would be surprised at just how many opportunities can be identified!

Don’t Overlook Prospects

A word about prospects. Think about the companies you are pursuing. Do they conduct activities that would make them eligible for tax credits and deductions? When you have the capability to help them capture significant tax savings, it may open the door to building a long-term relationship. Think about it this way: if you don’t offer specialty services, someone else will.

Related Article: The Value of Offering Specialty Tax Services: Understanding the Opportunity for CPA Firms

The engineering and tax professionals at Engineered Tax Services have helped accountants and their clients achieve maximum tax credits by conducting thorough studies and working as an extension of their teams. To learn more about Engineered Tax Services’ specialty tax and advisory services for CPA firms, please call Engineered Tax Services at (800) 236-6519 or contact us here

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Heidi Henderson

Heidi Henderson

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