Tax season 2020 is now underway.
This means more client interactions. Wonderful! This is why I do what I do!
It also means more client interactions. Sigh. Sometimes it’s hard to juggle my workload and client requests.
As tax season rolls on, so do the client questions. Of course, in business and in life, there are no stupid questions. This is especially true when they come from your clients. But they may not ask what they really need to know.
We polled practicing CPAs to find out what pressing issues and questions their clients have. Along with some fun (read: not real) answers, I’ll give you some tips on how to take the discussion further.
10. How does the IRS determine what returns to audit?
Dartboard. Seriously, there are several ways a tax return can win (or lose) the audit lottery. Certain “red flags” may increase those chances. The IRS uses the discriminate information function (DIF) system to review a tax return. A DIF score flags a return when information doesn’t add up. The AICPA® has resources to help when the IRS audits a return. Check out the AICPA Tax Section’s IRS Practice & Procedures Resource Center for guidance and practice aids.
9. How long should I keep my tax records?
Hoarders called, and they say it’s okay to shred some documents! There’s no hard-and-fast rule on how long to keep tax documents. But, we put together some general guidelines for practitioners and individuals deciding what to purge.
8. Do I have to pay tax on _________? Fill in the blank.
Well, that depends. But likely, yes, and I don’t think you would look good in an orange jumpsuit. Ideally, your client should ask this question before making a decision that could have a tax impact. Look at the “More services. More clients. Better relationships” guide that’s part of the Tax Practitioner’s Marketing Toolkit. It will help you expand your client conversations to truly be their No. 1 trusted adviser.
7. Will I itemize deductions this year?
The changes in itemized deductions coming from the Tax Cuts and Jobs Act (TCJA) will likely drive this conversation. With the increased standard deduction, the limitation on the state and local tax deduction and the repeal of miscellaneous itemized deductions, more taxpayers benefit the most by using the standard deduction. On the bright side, this conversation results in more talk around planning for future years. Take a look at the Analysis of a tax return for financial planning opportunities tool to explore these topics with your clients.
6. What kind of entity is best for my business? Should I consider converting to another type of entity?
This question is packed with potential follow-up discussions. An evaluation of the type of business entity involves discussing not just the current tax impacts, but also many non-tax considerations. One way to learn more about the considerations is by attending the session on Choice of Entity after the TCJA at the ENGAGE event.
5. When will my tax return be ready?
April 15 at 11:59pm! Hopefully, that is not the answer. Communicate your expectations for the workflow with your clients — turnaround time, timely responses to questions, etc. Consider creating deadlines to receive all client information or an extension will be filed. Hold your clients accountable. Otherwise, your clients become complacent with your deadlines. If you have clients who are averse to an extension, look at the “Tax extension FAQs for clients” part of the Tax Practitioner’s Marketing Toolkit to discuss the potential benefits.
4. What kind of retirement plan should I use?
Tax season is a good time to show clients the value of a retirement plan. With the SECURE Act passage, there are changes to retirement plan options. Make sure you are up to speed on those changes. One way you can learn more is to attend this webcast or listen to this series of podcasts.
3. How much will this work cost me?
We want clients to value our advice. Answering questions about fees can be difficult, especially for someone who hasn’t had those conversations before. We put together a series of “Addressing complicated client concerns” talking points to help guide your conversations. You can find them in the Tax Practitioner’s Marketing Toolkit.
2. What can I do to pay less in tax?
This question leaves so much room for discussion! Not all financial decisions will be the most tax-efficient ones, but most of those decisions have some sort of tax impact, even if it is down the road. Invite your client to complete the Personal Finance Scorecard to help them, and you’ll see where there are areas for improvement for overall better financial health.
1. Can I just ask one quick question?
I think we all know the answer to this one. There is no quick and easy tax question. Ever. But isn’t that why we love what we do?
For the latest updates and guidance during busy season, check out the AICPA’s tax season hub.