Analyzing a tax return is a complex and time-consuming process. Holistiplan simplifies this process through its state of the art tax planning software.
After years of preparing tax returns I know my way around a tax return. Even then it’s hard to beat the quick analysis that Holistiplan provides.
Whether you’re new to tax planning or have years of experience, Holistiplan is worth a look.
In this post, I’ll share why I like Holistiplan and how you can use it to create better outcomes and pay less tax.
An Intro to Holistiplan
Holistiplan’s promise, as described on its website:
The Holistiplan Solution
“We scale the process of tax planning so advisors can become both more comprehensive and efficient.”
Holistiplan takes the pressure off data entry and remembering tiny details. Instead, Holistiplan:
- Reads the tax return using advanced OCR technology
- Delivers a customized report with relevant observations.
Inside that customized report, it promises to deliver:
- White-labeled tax report within seconds
- Turnkey PDF to email or print
- Pre-filled scenario analysis screen
Holistiplan is a “done for you” tax return analyzer.
Custom Tax Letters
Holistiplan also provides custom tax letters. This is might sound boring but it’s a really important feature.
The tax letter enhances communication between the client, wealth advisor, and tax preparer. When I prepared tax returns there were many occasions where the tax documents were unclear on what happened.
This lack of clarity lead to back and forth discussions, which lead to more billable time. At it’s worst this would also lead to incorrect reporting.
One example is with Qualified Charitable Distributions (QCD). A QCD is a direct transfer from an IRA to charity. When this is done the transfer is tax free, but not deductible on Schedule A.
What happens is the client lists their charitable contributions in their tax organizer. They happen to list those contributions on the Schedule A section. This leads to overreporting the taxable IRA distributions.
It doesn’t help with the 1099-R doesn’t report the QCD anywhere on the form. As a tax preparer the 1099-R doesn’t help identify how much went from the IRA direct to charity.
Bravo to Holistiplan for creating tax letters to improve client communication.
How to use Holistiplan
After setting up a free trial I noticed that Holistiplan provides a sample tax return. I decided to use this sample tax return to get a feel for the program.
Step one is to set up a household for your client. This requires entering the client’s name and date of birth. Date of birth isn’t a required field. But, you’ll need to enter this to ensure you get proper age milestone guidance.
The next step is to upload the PDF tax return. This is where Holistiplan does its magic.
Uploading tax return is simple. Within 30-45 seconds the sample tax return was imported into Holistiplan. You can access the sample tax return here if you have a Google account.
The main screen you’ll use for your client is the Household screen. Here you will find options to navigate to View Return, Tax Report, and Scenario Analysis:
View Return
Inside the “View Return” section you will find a side-by-side comparison. This will allow you to compare the PDF tax return to the extrapolated data.
This is a nice feature to ensure that the OCR data recognition didn’t misread anything.
Holistiplan emphasizes the importance of a quality PDF. We’re moving closer to a paperless world, but some tax returns are still delivered in paper.
When paper tax returns are scanned to PDF the quality isn’t as pure as a direct PDF export from the tax software. If the paper tax return is scanned with a quality scanner this shouldn’t be a problem.
As a best practice, advisors should seek a PDF tax return exported from the tax software.
Tax Report – Quick Wins
The Tax Report is where you will find Holistiplan’s primary feature.
The Tax Report is the tax return analysis. Nothing else on the market compares to this feature. Your best alternative is the compare a tax return to a 1040 checklist.
The Holistiplan dashboard highlights 5 quick wins from the tax report:
- Back solve for what the client spent last year
- Capital gains/loss review
- Charity tactics
- Roth Conversion in Lower Tax Years
- Any opportunities on Schedule B
The Bane of many financial planners’ existence is uncovering a client’s spending. Using Holistiplan to back into that amount is a quick win!
I know this works because I’ve used the tax return to back into spending for years. Tax returns can tell you a lot!
Don’t believe me? Here is how Holistiplan explains it:
The remaining quick wins shortens the advisor’s learning curve.
Holistiplan will teach you the keys to good tax planning in few repetitions if you follow their quick wins list.
Tax Report – Key Figures & Tax Brackets
The first section of the Tax Report summarizes the Key Figures. If you need a quick cheat sheet about your client’s tax return this is where you’ll find it.
Below that you will find the Marginal Tax Bracket information section. This breaks down your client’s tax brackets.
This section is critical because your tax bracket isn’t based on the “Taxable Income” line on Form 1040.
Your tax bracket is made up of the Ordinary Taxable Income and Capital Gain Taxable Income.
The Tax Bracket Management Mini-Course teaches that Ordinary Taxable Income determines Capital Gain Taxable Income.
Next, Holistiplan shows a section for Medicare Part B/D premiums. This is an often-overlooked tax cost for Roth Conversion planning.
Tax Report – Summaries
The Tax Report shows a few other summaries for the most popular schedules of the tax return. These schedules are:
- A – Itemized Deduction Summary
- B – Interest and Dividends
- C – Business Income
- D – Capital Gain/Loss
- E – Rental real estate and Royalty
These reflect Holistiplan’s commitment to enhancing a tax planning conversation.
Tax planning is hard because of the little details.
Holistiplan makes this easy through the Modified Adjusted Gross Income tiers report. It outlines when taxpayer is over/under the limit of various these tax provisions:
Tax Report – Observations
The last section of the Tax Report are Observations.
This is where the most value is added. It’s another conversation enhancer. It also identifies planning pointers. This is what leads you to pay less tax!
I find this area to be quite robust. Holistiplan gets into an admirable level of detail.
You can access the full report here with your Google account.
Scenario Analysis
The last section is the Scenario Analysis. This is where you can take the analysis provided on the Tax Report and start tax planning.
Holistiplan describes 5 quick wins from running a scenario analysis:
- Tax expense estimation – general cash flow
- Tax expense estimation – special event
- Fine-tuning withdrawals
- Demonstrating a recommendation
- Developing a recommendation
Tax expense estimation will give you clarity on whether you will be over/under-withheld for taxes. During special events or material changes is when this is most important.
One example is to determine how much additional tax may be due if accelerating income into the current year.
Some taxpayers may benefit from accelerating capital gains to avoid a higher tax rate under potential tax reform.
Retirement tax planning requires fine-tuning withdrawals. Using a tool like Holistiplan helps execute a tax-efficient withdrawal strategy.
When working with clients, advisors need to prove and quantify the value of a strategy. Tax strategies aren’t always easy to implement. Run the numbers to determine if it’s worth!
Completing a Roth Conversion can’t be done without running the numbers. You need to to implement a smart Roth Conversion strategy.
Holistiplan allows you to run up to 4 Scenarios, which you can compare side by side. The first scenario is the base case of your most recent tax return.
The best practice for other scenarios is to copy the base case and adjust the facts as needed. This is standard tax planning, just like we use with the Tax Bracket Manager.
With Holistiplan you can choose to run a scenario using 2018 – 2025 tax rules. Most often you would select the next tax year.
Scenario Analysis – Premium Features
Holistiplan includes two valuable features:
- Solve for Max
- Range Calc
Solve for Max calculates the next change in effective rate. This can be helpful for Roth Conversions.
To test this, I removed the Wages in Scenario 2 and kept everything else the same. After selecting the Solve for Max here is what we see:
This is great directional information. Yet, it may not give you everything you need.
The way Holistiplan uses the Solve for Max differs from the way the Roth Conversion Analyzer seeks a tax bracket target.
This doesn’t make it wrong, but know that it takes a different approach.
The Range Calc feature shows the cost of the next $1,000 of Ordinary Income and/or Long-Term Capital Gains.
As a bonus both charts are interactive. This helps you zero in on where the breakpoints are on the tax return.
Holistiplan vs Tax Bracket Manager
Holistiplan is the best-in-class tax planning software. They have hit all the marks needed to enhance tax planning conversations.
The Tax Bracket Manager takes a different approach to tax planning. Our goal was to create a retirement tax planning software.
Holistiplan outshines the Tax Bracket Manager in:
- Advanced OCR technology to reduce data entry
- Client ready reports
- Best-in-class visual aids and design
- Comprehensive tax planning summary (i.e. Tax Report)
The Tax Bracket Manager requires data entry but this only takes 5-10 minutes.
You can sit down with a client, transpose their tax return information and be on your way.
With Holistiplan you risk a poorly scanned PDF not importing correctly. If it’s in paper it takes time to scan the PDF too. Net, net a PDF import may not save any time.
Scenario Analysis in Holistiplan seemed more difficult than the Tax Bracket Manager. Of course, I’m super comfortable with the Tax Bracket Manager so this might be unfair.
I dare you to compare a few tax returns. If the consensus is that I’m wrong I will correct this section.
Tax Bracket Manager is free and easy enough to walk through a tax return with your client. Holistiplan’s Scenario Analysis is too clunky for that type of conversation.
Holistiplan vs Tax Bracket Manager & Roth Conversions
Where I struggled the most was finding the right Roth Conversion amount.
The Solve for Max feature doesn’t get me to the top of the next tax bracket. I was hoping it would solve for the maximum income to a certain tax bracket target (e.g. 12%, 24%, $172,000 MAGI, etc.).
The Range Calc can get you there but it wasn’t intuitive for me. I prefer the done for you aspect of the Roth Conversion Analyzer included with the Tax Bracket Manager.
The biggest miss for Holistiplan is that it hides the tax brackets. Yes, the Tax Report shows where you are in the tax brackets. What we really need to know is the distance to the next bracket.
It would also be nice to see how each dollar fills the corresponding brackets.
Seeing this really helped me understand how tax brackets work. Once again… this is the tax nerd inside me that might be unfair here.
Holistiplan is the better software for general tax planning conversations of any demographic. The Tax Bracket Manager is designed for retirement tax planning.
Holistiplan can make a story out of any tax return with little effort through the Tax Report.
I’ll obviously need to give Holistiplan some more time/practice. Maybe in time I’ll find the Scenario Analysis more user friendly than it appears.
Overall, Holistiplan and Tax Bracket Manager aren’t competitors. Holistiplan is a comprehensive tax planning conversation enhancer. Tax Bracket Manager is a retirement tax planning calculator.
Try Holistiplan
There is no better way to receive a comprehensive analysis for a tax return than to leverage Holistiplan.
Reviewing a tax return and turning it into a conversation piece is a complex skill.
Holistiplan writes a short story for each tax return it analyzes. It’s delivers on its promise to create better conversions. Better conversations lead to better outcomes.
Most people love paying less tax, which is what Holistiplan can deliver to its users.
Go check out Holistiplan’s 7-day free trial to discover its value. While you’re at it sign up for the free Tax Bracket Manager mini-course to become a better tax planner.
Happy tax planning!
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