Tax Season look it: It's nearly that time of year again. (Tips & Resources).

You know, the time of year when everyone else breathes a sigh of relief that the holidays are over and starts the slow physical, financial and emotional recovery that the sluggish months of January and February afford.

But not you, oh tax-minded CPA. The holiday season is merely your warm-up to that marathon known as tax season. You may be holed up in your office for the rest of winter, and part of spring, but you certainly wont be hibernating. You'll be in high gear meeting with clients, researching what's new in the tax codes, updating your software, and providing the very best client service you can.

Here's a roundup of helpful tips and resources gathered from CalCPA members to ease you into yet another tax season.

2001 Tax Chances

As we go to press, Congress still is mulling over several laws that could affect 2001 tax codes, including a comprehensive economic stimulus package. With this in mind, here are a few general tax tips for the 2002 filing season:

* To ensure that you have the very latest tax information, it might be wise to wait until mid- or late December, or even the first part of January, to take individual and business tax update courses.

* In general, if the gradually declining top tax rates are not changed or accelerated, the strategy unique to year 2001 is to shift taxable income to future years when the top rates are lower. Negotiate deferred compensation, consider installment sales to defer gain, accelerate deductible expenses where possible, but keep an eye on AMT to make sure accelerated deductions really reduce your tax liability.

* If practical, gift appreciated property to children so income such as dividends and interest (when the child reaches 14) will be taxed in the new 10 percent ordinary rate bracket, and capital gain will be eligible for the 8 percent or 10 percent rate, rather than the parent's 18 percent or 20 percent rate.

California Tax Tips

FTB TAX PRACTITIONER HOTLINE

The FTB has changed its tax practitioner hotline hours for the 2002 filing season:

Monday-Friday: 8 a.m.-5 p.m.

Saturdays: 8 a.m.-4:30 p.m. (March 2-April 13)

The tax practitioner hotline, [phone], will not be open on state holidays or Sunday, April 14, 2002.

COURT PROHIBITS USE OF HISSERICH DECISION

A recent court action prohibits the FTB from applying the Hisserich decision in determining head of household filing status. In Hisserich, a taxpayer claimed her registered domestic partner's child as the individual who qualified her for the head of household filing status. Due to a recent cause of action challenging the Board of Equalization's decision in Hisserich, in October, the Sacramento Superior Court issued a writ of mandate ordering the FTB not to follow Hisserich for purposes of determining head of household filing status.

TEACHER RETENTION TAX CREDIT

AB 110 will provide immunity from the negligence penalty to individuals whom the FTB finds to have mistakenly, but not fraudulently, claimed a teacher retention tax credit in the 2000 tax year. However, those individuals will be required to repay the full amount of the credit. The FTB has clarified the intent of the law, for more information. visit www.ftb.ca.gov/other/Teacher/TRC.html.

AB 1115: SOURCING ALMOST MADE SIMPLE

Recently enacted AB 1115 sets forth rules for sourcing all types of income, expense, losses (including NOLs, passive activity losses and capital losses) on the California return using a source-based approach. Professor and CPA Kathleen Wright has written an article describing the ins and outs of AB 1115. It can be accessed at www.calcpa.org/californiacpa/articles/2001/11.20.html.

PENSION PLAN CHANGES

Federal Tax Tips

The 2001 Tax Act made significant changes to contribution, compensation, deferral and other limits for IRAs, qualified retirement plans and other pension plans. For an overview, visit www.calcpa.org/members/knowledge.

REDUCED CAPITAL GAIN TAX RATES

Except for taxpayers in the 15-percent bracket, the top rate for gains on assets purchased after 2000 and held for more than five years will be 18 percent, instead of 20 percent. This applies to the long-term capital gain tax rate imposed on noncorporate taxpayers for regular and alternative minimum tax purposes after 2000.

However, to preserve the 18-percent capital gain, a taxpayer holding a capital asset or an asset used in the taxpayer's trade or business on Jan. 1, 2001, may irrevocably elect to treat the asset as sold for its fair market value and re-acquired for the same amount. If this election is made, any deemed gain must be recognized but any deemed loss is disallowed.

It appears that gain from an elective deemed sale of a principal residence may not be excludible under IRC Sec. 121.

To learn more, go to www.calcpa.org/members/knowledge.

RATE REDUCTION CREDIT

The 2001 Rate Reduction Credit requires that taxpayers reconcile their actual credit with the check they received in October by completing a worksheet to compute the credit based on their 2001 return, and then subtracting this credit from the check amount.

If the result is positive, taxpayers may claim that positive amount as a credit against their 2001 tax. This would occur if a taxpayer paid no 2000 tax but will pay 2001 tax.

If the result is negative, the taxpayer does not have to repay this amount to the Treasury. This would occur if the taxpayer paid 2000 tax but will not owe 2001 tax.

For more details, go to www.calcpa.org/members/knowledge.

OnLine Tax Resources

FREE WEB SITES

The Internet continues to grow as a vital source of timely, free information for CPAs. Here are three sites that no CPA should be without:

* http://ftp.fedworld.gov/pub--This is the heart of the IRS Web site, without the graphics and glitz. Here you will find announcements, notices, revenue procedures and revenue rulings, all posted in Internet time.

* www.ftb.ca.gov--The Franchise Tax Board site offers current information on tax laws that are both pending and passed.

* www.edd.ca.gov--The Employment Development Department Web site is a rich source of tax information for both employers and employees. There is a benefit determination guide for unemployment insurance as well as precedent-setting decisions from the EDD Appeals Board.

SUBSCRIPTION TAX RESEARCH SERVICES

Tax practitioners can subscribe to one of several paid services that provide both online and CD-ROM-based resources--the days of volumes of books are gone. Each service provider offers different products that are offered at different frequencies and for different costs. Top providers include:

* BNA, www.bna.com--Says Marina Del Rey-based CPA Gregg Wind, "We use two tax services in my office, BNA and Kleinrock, both on CD-ROM. For practitioners on a budget, Kleinrock can't be beat. The CD is about $395 annually and provides a practitioner with most of what he or she will need to perform most tax research. We have given some thought to switching to a Web-based platform so we won't have to have our computer consultant come in every month to update our CD jukebox."

* CCH Incorporated, www.cch.com--"I use CCH online now and I really like the ease of it," says Cupertino-based CPA Noelle Allen. "We decided to go with a completely online product this year after we were able to get fast Internet access. Since I write a lot of manuals, I probably do more research than most accountants. I am thrilled with this service."

* Kleinrock, www.kleinrock.com-"Presently I am using Kleinrock for tax research," says Encino-based CPA Steven J. Duben. "It is adequate but far from all-inclusive. I am looking into other programs, but have not found one I like."

* One Disc, www.tax.org/tcom/federal/onedisc.htm--"We like to use paper services for most tax information, RIA and BNA portfolios," says Danville-based CPA Mary Kay Foss. "We also subscribe to One-Disc by Tax Analysts, which provides a quarterly CD with letter rulings and court cases as well as the code and regs. One-Disc also has been sending a weekly newsletter that discusses developments. This has been a good resource."

* RIA, www.riahome.com--"As a sub-tenant in a medium-sized CPA firm, I have access to RIA for my online tax research and to the BNA Tax Management Portfolios for hard-copy research," says San Francisco-based CPA Marl Jansen. "I highly recommend BNA for the quality of its portfolios."

* Spidell Publishing, www.caltax.com--"We use Spidells (both print and online) for California. I recommend it. They do a nice job of focusing on California issues," says San Jose-based CPA Daniel D. Morris.

Is Your Software Ready for the Tax Season Challenge?

CPA allegiance to tax software is like a New Yorker's devotion to the Yankees. They pick a package, and they stick with it through upgrades or price increases. So even if you're not looking for new software, it's in your best interest to do a preflight check before you take off into tax season:

* Make Sure You Have the Latest Version: If you've been hanging on to old versions of your software because you fear losing data or suffering system failures, it might be time to bite the bullet and upgrade. And if that means upgrading your hardware to accommodate today's larger software programs, it could be well worth doing before you get into the thick of tax season.

* Keep Support Numbers Handy: By acquainting yourself early with your software support options, you'll be ready in a pinch. Browse your software provider's Web site to commit to memory their online support offerings and call-in hours. Most providers keep an online update of their call-in wait time that might be worth checking out before you call. The sidebar on this page lists quick contact information for major providers.

* Check for Updates: Even if you have the latest version, there are often glitches and software providers will post patches or fixes on their sites that you can download and install onto your computer.

* Go Tree Free: If you haven't done so yet, consider converting to a paperless office or electronic document management system. It could save you time and money in the long run.

* How's Your Operating System?: New PCs now come equipped with the Windows XP operating system. If it's time to upgrade your system, you might want to buy a PC with this latest and greatest software already installed. If you are running older versions of Windows, such as 95 or 98, it is definitely time to modernize your system. Microsoft is phasing out support of these legacy products.

* Link Away: It saves time and redundant workflow. CalCPA Technology Committee Chair David Primes says, "The best tip I have about using technology in tax season is taking advantage of the linking available from workpaper packages to the tax prep packages. This is where we have been able to leverage the technology investment and increase productivity. Examples are Creative Solutions GoSystem Audit and ePace."

Creating a Client-Focused Tax Preparation Package

Clients come to you for your sound business advice and because they dread doing their own taxes. The easier you make the process, the more they will rely on you. Here are a few ways to maximize your tax planning package:

ONLINE ORGANIZERS

Several of the larger tax software packages now come with an electronic version of their organizer. You can put this organizer on your Web site, where computer-savvy clients can fill it out online. For all-around time savings, the information is automatically pulled into your client's tax return.

This might not be the best tactic for new clients, however. The non-verbal cues given during a face-to-face meeting will not come across in an electronic survey. You may want to screen new clients in person before offering the online option.

Some clients also may think that if they can fill out the tax organizer online, they can do their own taxes with a cheap software program. It is always good to gently remind clients of the value you are adding, even if you use tax preparation software. Let them know that your tax software is for professionals who understand complicated tax codes.

PRIVACY NOTICES

Cut down on the amount of mail you send your clients by including your privacy disclosure letter in the tax organizers you send to clients. 'Ready to Disclose How You Protect Your Clients' Privacy?" which appeared in the March/April 2001 issue of California CPA, details the Gramm-Leach-Bliley Act that requires this letter. The article is available at https://secure.cnchost.com/calcpa.org/password/californiacpa/articles /2001/03.03.html. The letter must be sent to clients every year, so it makes sense to include it as part of your tax organizer. You'll save a postage stamp and also reduce your chances of overlooking this federal requirement.

MARKETING MOMENT

Any time you interact with your clients is just one more opportunity to prove to them how valuable you are as a business adviser. As you prepare your tax planning package for clients, think of ways to personalize your letters and let them know the other services you can help them with through the year such as strategic planning, human resource consulting, pension planning and much more.

Above all, keep in mind that late-spring is a much better time to relax and unwind than post-holidays.