Addressing your clients’ future needs with proactive tax planning

Tax season is here, and the steady flow of clients that pass in front of us has commenced! Hopefully, at this point, your workflow is in place and your calendar is open for appointment setting. It’s also the time to come up with a list of questions to ask your clients at tax time. In addition to your due diligence, consider adding additional questions in your interview with your client to create opportunities for advisory services and tax planning all year long.

How many times have you had a client, in the heat of the season, give you information you wish you already had? Often, clients neither realize the extent of what we do, nor know the extent of our knowledge. To most, we just fill out forms!

Over time, observation and experience, I came up with a set of “preventive” questions to avoid receiving information too late. However, what started out as a series of questions turned into a conversation with my clients that opened the door to even more important planning conversations and engagements. Even more importantly, I emphasized my role as a trusted tax advisor rather than a preparer of forms.

Here are some tips for the conversation:

Introduce yourself: Have you really introduced yourself to your clients? In addition to your name, you want your clients to know your credentials, specialties and anything else you may want to showcase. Unless you tell them, I can guarantee they won’t know. Do you think they are looking at what is hanging on your walls? Maybe, if they look up from their phones, they may see your licenses and certificates, but assume they don’t read them. Brag about yourself. Put yourself out there as an authority.

Pay attention: Listen to your clients. Pay attention to their documents and what they are saying to you. Look at the documents, all of them, front and back, and pull everything out of the envelopes. I know that is basic, but the treasure trove of information you might find tucked inside the W-2 envelope can easily be missed if you pay attention to only extracting the W-2. Your client put it there because, in their mind, it had something to do with their taxes. Pay attention to the trends in their year-to-year numbers, as well as stages in their lifecycle.

By observing and paying attention, you will be able to develop a series of questions unique to that individual’s or company’s tax planning needs. Everyone’s list is different. Be careful to not fall into the trap of running off a series of questions that won’t even be relevant for you client’s situation. They will, at that point, just get annoyed and clam up.

Life Events to Cover

Here are some common tax and life events to be aware of, grouped into target demographics. Each of these events create questions you can proactively ask your clients.

For clients 20-30 years old, ask about:

1. Employer 401(k)/potential IRA
2. Withholding excesses or deficits
3. Stock options and profit sharing
4. Positioning for home ownership
5. Marriage and dependents

For clients 30-50 years old, ask about:

1. Major life changes, such as career changes or loss
2. IRA and other retirement issues
3. Positioning for home ownership
4. Loss or gain of a more substantial asset
5. Divorce and marriage
6. Trusts

For clients over 50 years old, ask about:

1. Major life changes, such as career changes or loss
2. IRA and other retirement issues
3. Loss or gain of a more substantial asset
4. Trusts

For business owners, ask about:

1. An upswing or downturn in income and/or expenses
2. Wages vs. distributions vs. dividends
3. Purchases of more substantial assets
4. Sales of assets

For investors, ask about:

1. Liquidating all assets
2. Purchases of more substantial assets
3. Sales of more substantial assets

While this list is not all inclusive, it gives a good overview of what events will open opportunities to further tax planning conversations.

Continue Building Trust

The rest of the process is getting your clients to look to you for advice ahead of time rather than after the fact. Pay attention to precursors. For example, if they have a desire to change withholdings on a W-2 or want to do a year-end liquidation of stock, take the initiative and ask them why. It does take a bit of training for both of you.

You’ll know you’ve done a great job of building the relationship, guiding the conversation and setting goals when they ask for your advice ahead of time. Take marriage, for example, if they ask about the impact marriage will have on their taxes before they even ask their intended to marry them.

Value is spoken about a lot in our vocation, and I think some miss the mark. It’s not about what we can do for them and building value; it’s about what clients bring to us and helping them find the value in it, whatever form that value may take.

Developing a list of questions unique to each of your clients is easy. Weaving it into conversation takes a bit more practice, but it is well worth the effort.

Good luck!