It’s tax time and, be it virtually or in person, we’re meeting with many of our clients. In some cases, it’s the only time all year we will hear from them. We need to gather the appropriate financial information so that we can prepare their tax returns and, for some, annual personal financial statements. While your clients are sharing their financial activity with you, are you really listening to the information they are providing? Here are some ideas for learning more about your clients by paying closer attention to what they are saying.
Does your client have a 1099B reporting sales of stock? Beyond recording these sales on the tax return, take the time to ask your client about stock selling decisions. Was there a need for additional cash? If so, that information might help you begin a discussion about budgeting and financial management. Or perhaps the taxpayer is using the cash to purchase other assets or help a family member. Tax and planning ideas can germinate from discussions of why items were sold. And don’t forget to talk to your client about tax issues relating to the timing of decisions on selling stocks.
Likewise, if your client is investing in stocks or other assets, your expertise in the tax ramifications of owning these items might enable you to provide helpful tax-related information to your client for ongoing ownership of additional stocks, a vacation home, or whatever the investment might be.
Did your clients contribute to charitable organizations? For many, the allowable deduction for contributions is lower than in the past, however careful planning can help a taxpayer lump itemized deductions in one year and perhaps get the tax benefit of higher contributions to favorite charities. But don’t stop there, because a restricted deduction doesn’t change the emotional reasons for choosing charities to support. Talk to your client about the decision-making process behind the choice of organizations to which the taxpayer contributes. You might suggest your client get more involved with the charity perhaps in an advisory or board position, or your client might be able to help the charity connect with other potential donors by helping the charity explain to potential donors how recent changes in the tax law impact deductions for donations.
Does your client have children? Have you had any discussions about college costs, financial aid, college savings plans, and the tax implications of all of these? If not, tax time is a good idea to start that conversation and help your client plan for the future. If your client’s children are already in college or are paying back student loans, be sure to discuss current COVID-related information on student loan forgiveness and employer payments of student loans, as well as options for tax credits relating to college costs.
Does your client contribute to an IRA or a 401(k) or other tax-deferred retirement account? Here’s an opportunity to discuss investment alternatives, borrowing, loan options, withdrawal requirements, and retirement planning in general. Many clients don’t even mention the company retirement plan to the tax accountant, thinking it’s not relevant to current taxes, so you can start the discussion by asking for information on how your client is planning for retirement.
Be sure to include questions in your client meeting about family members, how COVID-19 has impacted job security, and expectations for the future. You might find that these questions lead to additional opportunities to provide worthwhile services to your clients.