Finding a better way: Tax planning and training client expectations
Angie Wood, CPA | October/November 2024 Footnote
I started my firm in December 2019 — right before the pandemic hit.
As we all know, the pandemic brought rapid tax law changes. It felt like we were getting hit with a new law — or clarifying information on a law — every day! On top of that, this all came shortly after the Tax Cuts and Jobs Act of 2017 changes. The act created an unexpected tax liability or refund for almost everyone. Even those who had their withholdings and tax situation pretty much dialed in year after year were experiencing big changes.
That year, I had to break the news to many clients that they owed $20,000 — for some reason, that seemed to be the magic number! They were understandably surprised, frustrated, mad, confused and worried about how to pay their debt. After my second tax season with my business, still experiencing the same situation, I decided I wanted to stop being the bearer of bad news with almost every tax return I prepared.
After that second tax season, I took some time to reflect on my business. This wasn’t what I wanted and was not what I envisioned when I decided to start my firm. There had to be a better way.
Changing the approach
The pandemic threw me and my firm into chaos, and I wanted to do better for my clients.
I took a step back and tried to see things from my clients’ and prospective clients’ eyes: Why were they looking for a CPA to prepare their taxes? Taxes can be prepared in so many other ways, as we know.
But why a CPA? For advice, of course.
I decided in that moment to make year-end tax planning part of my minimum service offering. I was already doing this with many clients (usually business owners), but I realized there was a huge demand for tax planning with individuals, too. Besides, I had already been giving away some of this advice for free when clients would reach out in a panic about a new law change.
That fall, I sent out a message to all clients, letting them know about my new requirement. I presented this shift as working with clients who want a relationship, not just a transaction.
I offered to meet with anyone who had questions or concerns, but only one client did. Some clients left my firm because they were just looking for a tax return and didn’t want advice (or at least they didn’t want to pay for it). Most clients were excited and said that this is exactly the advice they had been wanting!
Now, when tax season rolls around, I no longer spend time in meetings with clients because we just had our meeting in the fall. Instead, we send out tax organizers during tax season, gather their documents, prepare their tax return and send it to them.
There shouldn’t be any surprises because we already planned for filing.
Making the best use of our time
I first invested in Ignition to streamline this new process. This software allows me to create a proposal, include an engagement letter, collect payment information and pull payment when a bill is due — all in one. I set up each client in Ignition, created a proposal for each client that included tax planning (with the tax planning fee due upon signing the proposal) and tax return preparation (with the fee due upon completion of the tax return, before e-filing).
Once clients signed the proposal, they automatically got a link to schedule their tax planning meeting with me through Calendly. I allow the meeting to be however the client prefers: a phone call, in-person or virtual through Teams. Once that meeting gets scheduled, they are automatically given information on what to provide (YTD paystubs, YTD brokerage statements, information on any major changes during the year, etc.). We pull together this information, annualize out the rest of the year and use this as our starting point for meetings.
During our meeting with clients, we talk about what their tax liability or refund looks like if nothing else changes; how any tax law changes that may affect them; what their goals are and loop in their financial adviser or estate planning attorney to make sure we are all on the same page. Using that information, we create additional scenarios for clients based on our conversation about their goals, which gives them time before the end of the year to make any changes needed to reach those goals.
Some additional scenarios we commonly run through include changing withholdings, increasing how much they put into retirement accounts, doing Roth conversions, determining when to take Social Security, how much to donate to charity (and which methods make the most sense), which accounts to take funds from when in retirement and so on.
A change for the better
This new approach has made tax season more efficient by avoiding unnecessary meetings. It also means not having to break the bad news to clients regarding how much they owe — who needs that stress during tax season?
Most significantly, this change strengthened my relationship with clients, because they get the advice they are looking for and get to meet with me during a less stressful time of year.
Through this approach, I’ve also created a great revenue stream for the second half of the year, while also keeping track of exactly which clients are coming back to us for the tax season. We no longer send out organizers and engagement letters wondering if they are still a client or not. We don’t worry about whether we need to extend returns for clients we haven’t heard from.
I have learned a lot during the past few years using this approach, but I still continually make changes to refine the process. For example, this year we started tax planning meetings much earlier in the year, rather than waiting until after the Oct. 15 deadline, because I was running out of time in my schedule.
All new clients know this is our firm’s process and they will get exactly what they are looking for — good advice.
Angie Wood is the owner of Wood CPA in Edina. She has owned the firm for five years and has 20 years of experience in the industry. She can be reached at awood@woodcpamn.com.
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MNCPA Tax Conference
Nov. 18, 2024 - Nov. 20, 2024 | 24.0 CPE
