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Steven (00:53):

Hello everyone, and welcome to the next episode of the Retirement Tax Services podcast, financial Professionals edition. I’m your host, Steven Jarvis, CPA. I’m very excited for this week episode because I have a special guest with me today. Someone I’ve seen speak multiple times who’s a regular guest at CPA conferences and speaks throughout the industry on all things tax related. Joining me this week is Robert Keebler, CPA. I think you have several other designations that come with it, but Bob, thanks so much for being on the show with me.

Robert (01:19):

Honored to be here, Steve.

Steven (01:20):

Yeah, before we have a couple of really exciting topics we want to dive into, including things that financial advisors can be doing to add value as well as kind of helping, hopefully helping people navigate the line between tax planning and tax advice. But before I get too far ahead of myself or anyone listening who maybe isn’t as familiar with you as I am, just give us a little bit of background as to what you do and not just what you do currently, but what’s led you to where you’re at now?

Robert (01:44):

Well, to make a long story short, 1990 believe Pricewaterhouse come up to Green Bay and quickly found out that at the intersection of the estate tax and the income tax was an area that no one wanted to play. The lawyers weren’t thrilled about doing the income tax work in 1990, and the CPAs weren’t really thrilled about doing the estate tax work. And there were all these gentlemen who had worked at Procter and Gamble for 30, 40 years who had three $3 – $4 million in their pension plans and they had a pension plan subject to both income tax and estate tax. Keep in mind, the estate tax exemption was only $600,000 back. So we suddenly got good at all the IRA stuff and then that morphed into all the heavier estate planning, which morphed into the private letter rulings in the gift estate and fiduciary income tax returns. So that’s how we got here today.

Steven (02:47):

Yeah, so I would imagine at this point you’ve seen it all. We’re going to talk here in a minute about some of the maybe more routine things that advisors can help their clients do, but you and your team get into the complexity of this stuff as well.

Robert (02:57):

We’ve done about 300 private letter rulings and probably somewhere between 700 and a thousand federal estate tax returns. I wish I had kept track. That’s over a long period of time. Don’t forget, time is my friend. And so our work comes from law firms, CPA firms and financial planning firms.

Steven (03:19):

So Bob, as you pull from decades of experience and literally hundreds of private letter rulings, thousands of estate returns, what are those most common tax planning opportunities that you’re seeing financial advisors really help add value to their clients on?

Robert (03:31):

Well, I think there is a crisis in the CPA community and because of that crisis, CPAs, at least I’m not talking about the biggest firms, but the other 99% of the CPAs out there are focused on business tax, S corps, C corps LLCs, anything where the genesis of the work is double entry bookkeeping. And that leaves wide open the taxation of individuals and what individual taxpayers have done for a good 25 years is they have pushed back extremely hard on CPA billings. And so the CPAs are saying, wait a minute, I can take care of businesses and have a happy life, or I can try to take care of all these orphan 10 forties and really work hard for nowhere near the same reward and have all that up and down in my practice. So the CPA firms have to some extent been very selective about which 10 forties they’re going to retain.

(04:38):

So that work is drifting into the financial advisory world with many, many financial planners earning the EA designation, which allows them to represent people in front of the Internal Revenue Service. So with that designation, they’re doing just a lot of work. And so there’s a group of financial planners that are adding value on the tax side without the EA, and there’s a group that have gone further earned the EA and now they can actually represent people in front of the Internal Revenue Service, do tax returns, things like that. So you kind of have to look at both groups, but I think where the ball is going is that clients Steve are, they are just clamoring for one stop shopping. I mean, they would love nothing more and it’s ethically impossible for their lawyer, accountant, financial advisor to be under one roof because all the time I’m brought in by lawyers who are having issues with financial planners who are really walking all over the lawyer’s advice and they want me to come in and try to figure out what’s the best solution for the client and the other way around too. So I think that’s the challenge.

Steven (05:47):

I think you’re absolutely right, and I think it’s really important that you highlight the context of how we ended up here because over the last few years, it’s felt like the financial planning world has leaned more into tax planning, but it does feel a little bit like the wild west that you have some people who are licensed enrolled agents, some people who aren’t, and I think what you highlighted that clients aren’t getting that help from CPAs and the traditional firms, and so they’re coming to financial advisors and saying, Hey, help me. And some of those financial advisors are being really intentional and making sure they navigate those waters of what’s tax advice and what’s not. And some of ’em are just saying, well, great, you asked me about taxes. Well, let’s do it all together. And that’s creating some of these issues,

Robert (06:26):

And I think that’s really probably where it’s going. If you look at the AI CPAs, PFP group posts, people were CPAs first, then they got the PFS, and now they manage money and they also do the person’s tax returns. There’s a thousand plus firms like that across the country, and that model has worked very well. It’s proven that CPAs could be trained in investments, and now we find out if the opposite is true and time will tell.

Steven (07:03):

Bob, one of the reasons I talk about this topic so often is that whether financial advisors want to go as far as getting a designation or a license to represent their clients, they’re already having an impact on their tax return. In fact, if you’re listening to this episode when it releases on February 10th, we’re doing a webinar on February 12th specifically about all the ways that financial planning already impacts the tax return, whether you want it to or not, because without even getting into the complicated stuff, when you help a client roll over an account or rebalance their portfolio or do just about anything with their money, there’s the potential to have an impact on the tax return. It really just becomes a question of are you going to be intentional or are you just going to hope for the best?

Robert (07:45):

I think that’s the issue, and for most financial advisors, they want to get themselves as educated as possible and then have half a dozen first class CPAs in their pocket that can help them from time to time.

Steven (07:59):

The question I get from advisors all the time though is how do I find a half dozen gold star CPAs that can have in my back pocket because they really struggled to find them. We try to be that answer for some of ’em, but we can’t help ’em all.

Robert (08:11):

It’s a real struggle because it really comes down to a CPA firm can do business work, which is 12 months a year and let’s say pays a dollar an hour and clients pay on time with very little grief, very little emotion in all this. Or they can do individual work, which is maybe 12 weeks a year altogether, a lot of downtime coupled with people that get very emotional coupled with the fact that a lot of people will say, I’m not paying that bill or that this national tax prep firm on the corner by the McDonald’s would’ve done it for half the price. That’s all I’m going to pay you. I mean, that’s the challenge.

Steven (08:54):

Yeah, it’s definitely tough dynamic. I will say that, I mean there definitely are advisors who are doing just that, so it can be worth the effort to build those relationships. But if we focus for a minute on what the financial advisors themselves can do, because I do run into advisors who I think get a little too gun shy about being involved in taxes at all, saying the word tax does not count as tax advice. There are absolutely things as an advisor you can bring up to your clients, you can recommend to your clients. Yes, you obviously want to do it in collaboration with their tax preparer if at all possible. But we can start with some high level planning activities that just about any advisor who worth their weight can get involved in. So I guess what are those most common things, leaving the complexity aside, what are those common things that advisors should be looking at every year with their clients?

Robert (09:39):

It’s just kind of a checklist. Yeah, how much money can I put in IRAs, Roth IRAs or non-deductible IRAs? Should I be doing loss harvesting or gain harvesting? Should I be, if I’m going to have a big sale and I live in California, should I be moving that into a Nevada trust?

(09:56):

What years do you itemize in and what years do you take a standard deduction? And then what do you use to make your charitable gift QCDs or appreciated securities? Of course, there’s the ever present Roth conversion conversation, which small tactical bracket driven Roth conversions are certainly something the financial advisors should look at. Bigger, more strategic wealth transfer planning conversions are probably something better in a CPA firm environment because you have the estate tax and income tax all moving at once. IRA beneficiary forms coordinating those with the lawyers. Very important backdoor Roth IRAs, backdoor 401ks 529 plans. I mean, there’s a long list that probably takes a couple hours per topic to learn, and I think there’s a lot of value that can be added.

Commercial (10:47):

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Steven (11:33):

I totally agree, and Bob, as you go through that checklist, I’m sure a variety of people in our audience, there’s some people who are say, Hey, those all sound familiar, but I need to learn more. Some people say, Hey, I’ve been doing this for years, but a refresher would be great. I know you regularly speak at the AICPA’s Engage Conference. That’s one I attend every year. Fantastic for technical topics, a lot of those things are things that we cover at our annual tax summit, which will be September 30th through October 3rd this year. There are absolutely resources out there to become more knowledgeable to learn how to put these things in practice. One that you mentioned, Bob, that I’d love for you to speak just a little bit more on because it’s not something I get into too often On this show. You talked about the importance of IRA beneficiaries. Speak a little bit more as to why that needs to be more of a conversation than just listing a person’s name.

Robert (12:16):

Well, what happens sometimes is the financial advisors will just do what we call a caveman beneficiary form wife, children. And for example, I’m working with a doctor right now. He and his wife have five children, and if he dies first it goes to his wife. No one would disagree with that.

(12:33):

That’s what everybody wants. But what happens next? The five children, just like if you have five children, the only guarantee is that they’re not all perfect. We need a couple of trusts there for various reasons, but right now it’s going right to those children. One of them undoubtedly would spend all the money within 12 to 18 months and we’re talking millions of dollars, but he’s showing a propensity to go through money very quickly. So you need to use trust, you need to weave all that together, and that’s a conversation for the client to have with their estate planning lawyer. But the financial advisors have to facilitate that, Steve, they have to do that. And if you help somebody convert a hundred thousand from a regular IRA to a Roth and the lawyer drafted the beneficiary form for the regular IRA, you have to go back to the lawyer and say to he or she, what do we do with the Roth?

(13:27):

How do wean that into the fabric of the estate plan? And I think what we’re seeing is if the financial advisors would take the lead on the money management and the financial planning and then work with the lawyers on the estate planning and the CPAs of the tax planning, that’d be a perfect world. But remember, I mean, if all lawyers, accountants and financial advisors were made in the factory and we were all the same, those relationships would be easy, right? We could be programmed to know what to do, but everybody views these lines differently. And I think the other thing we’re going to see this year, 2025 is a tremendous opportunity to add value on the estate gift side once we see how short the extension of the sunset’s going to be. But keep in mind, on the estate planning, what I encourage most financial advisors to do is to find good lawyers and CPAs and not to spend a lot of time on the estate tax because that only makes up one out of about a hundred or 200 clients. Think about that, and you probably have an obligation to spend your time on the general income tax things that we just went through because that’s 99 out, that’s a hundred out of a hundred people, and it’s a matter of where do you add the most value for your clients? And it’s okay just to bring in other experts. You just have to find those other experts.

Steven (14:48):

Yeah, Bob, as you were going through your checklist, and for advisors listening, if you don’t already have a checklist you’re using, write down what Bob just said. Go out to our website and get our 37 point checklist. You need to systematize this. That’s where I’m seeing the most people do the most good for the largest portion of their clients. To your point, I mean, we haven’t talked about anything exotic here. We haven’t talked about any proprietary tax strategies nobody’s heard of because these things that you and I are discussing are the things that apply to 99% of clients. And yes, there is a place for more complex planning, but it’s still the exception more often than the norm. And so if you want to deliver value on tax planning to the majority of your clients, you need to have a consistent systematic approach to how you’re going to do that each year.

Robert (15:27):

Well, I think it’s just discipline.

Steven (15:30):

Yeah.

Robert (15:30):

I think if you have a checklist, just imagine going in for your physical and the doctor just go back 20 years before it would be on an iPad, but the doctor pulls out of his drawer physicals for males age 35 to 40, and it’s got 200 questions put together by a group of 30 professors. Well, you feel pretty good because you realize it’s not just your doctor, but it’s the 30 professors behind that checklist that’s walking you through this. This is no different. And between AI in Google and all these tools we have now, there’s no reason on these basic techniques that a financial advisor would ever get stuck because if you say, oh, I’m meeting with Keebler tomorrow, he’s taking stock out of the Coca-Cola plan, you should be able to find something on how to do that online at 12:45 at night when you realize you’re not ready for your meeting at seven 30 in the morning.

Steven (16:24):

The reason I like covering these topics, and you spoke to this with kind of the state of the CPA industry, whether advisors think the CPA a should be responsible for all these things or not, the reality is most CPAs aren’t taking responsibility for these proactive tax planning issues for individuals. They’re focused more on businesses. The ones who are focused on 10 forties unfortunately, are usually focused on volume and not forward looking planning. And so you can sit there and ring your hands all day about whether it should be somebody else’s responsibility or not, or you can make sure that your clients are getting value on this topic and you can take responsibility for it yourself.

Robert (16:56):

The hard thing is knowing how to be the catalyst without giving tax advice that requires judgment, which would become the unauthorized practice of a county or the unauthorized practice of law. And unfortunately, if you go to a thousand CPAs from professors to newbies, people would draw that line at different places. And I think it depends where you are in a place like downtown Chicago, New York, Los Angeles, where there’s all kinds of talent. That line is probably different than 200 miles from the state capitol in some state where the population of the town is 15,000. So it just changes where you are.

Steven (17:37):

Yeah, there’s definitely different dynamics at play there, and you’re absolutely right. People are going to give you different answers on where that lined between tax planning that a financial advisor can comfortably do versus tax advice that they really need to leave up to a licensed. So Bob, I love getting into real life examples of this. I mean, where have you seen this gone wrong, where an advisor took it too far, whether it’s what they promised to a client or where they tried to set up before they got this CPA or attorney involved? What are some clear lines of, Hey, you’ve definitely gone too far as a financial advisor?

Robert (18:05):

Well, one area we see is dream estate administrations. Grandpa dies, grandma meets with the financial advisor. All the property is joint plus beneficiary forms, and the financial advisor ity split moves all the property into the wife’s name and never tells them to file an estate tax return. You do that to get something called portability where you move husband’s exemption to wife. So that’s an example I’m dealing with right now where just everything went wrong because the financial advisor to reduce cost of the lawyer and accountant basically boxed out the CPA and the lawyer. Now some kind of shame on him. But on the other hand, on the income tax side, things can go wrong when you get into areas requiring judgment. For example, I die, my family gets advice on how to take the money out of my pension plan, and the government says, you did that wrong.

(18:58):

You owe us the 25% penalty. Steve, if that advice came from use Steven Jarvis, CPA, I will get that penalty waived 100% of the time. If that advice comes from a lawyer, I’ll get it waived a hundred percent of the time. Or an enrolled agent if it comes from a financial planner, no matter how many designations they have in the financial planning world, but who’s not licensed to practice before the Internal Revenue Service, I’m not sure I’ll get that penalty waived. There’s no precedent on this, but I know that service will work with me if the advice was reasonable and it came from a lawyer, an accountant, or an enrolled agent.

Steven (19:36):

Bob, you bring up a really interesting point there a lot of our listeners might not be aware of because there are these different precedences on how the IRS will handle situations that were initially done wrong. To be clear, for everyone listening, what you didn’t say in there is, Hey, if you use a licensed professional, you don’t owe the taxes. The IRS is still going to get the taxes, but when we get something wrong in a prior year, the IRS starts tacking on pretty steep penalties and interests at times for underpayments, especially if they become significant underpayments. And so what you’re describing there is that for the taxpayer, if they can show that they made a good faith effort, they relied on professional advice, there’s precedent for getting those penalties waived. And last from the IRS’s perspective, you were just trusting some guy, some lady who didn’t have the right designations, who didn’t have the right licensing, which you mentioned this before we hit record. But this gets really tricky and can feel really convoluted because when you have a financial advisor who’s got three decades of experience and a lot of quality credentials behind him compared to the enrolled agent who’s 23 years old and has been through one filing season, that can feel like it’s not really the same thing. But the IRS is pretty clear on which designations they’ll take as being able to represent clients

Robert (20:49):

Or give tax opinions. Yeah, see, and this is the hard thing, and the public is absolutely demanding that the financial advisors be involved in overall tax management a

Steven (21:03):

Hundred percent.

Robert (21:04):

And it’s a matter of, my guess is if you looked at the criteria to do this well is you probably knew everything you’re supposed to know by first or second grade, meaning how to get along with other people. And the financial advisors that really are very purposeful with working with the CPA and the lawyer will always be fine. And what CPAs and lawyers get upset about is when the financial advisors become prescriptive, very much like a physician would write a prescription to a pharmacist where you’re just, Steve, I need you to do this and make the following elections. We’re not asking for you to be involved. In other words, I need you to do this versus what are your thoughts on this approach? Can we get you to help us with this?

Steven (21:49):

And Bob, in my experience, a great way for the financial advisor to distinguish which one of those approaches they’re taking is the timing of that conversation. Because if an advisor comes to me in July and says, Hey, for this coming tax filing, here’s some things that we’re considering doing, we’d like your input on, and we still have a runway to do something different, then I feel like they’re treating me like a peer. They’re bringing me into the process when I can still have input. If on the other hand, this is coming out in February of 2025, if you come to me in February of 2025 and say, Hey, Steven, I already did this in 2024 for my clients, and here’s how you have to report it. Well, guess what, Bob? I’m not really going to be excited to take your phone calls anymore. So the timing alone can make a huge difference on how that relationship develops.

Robert (22:34):

The timing, and also for the financial advisors, keep in mind, by February 15th, CPAs already tired and what would’ve bounced off them in July becomes a big problem in February.

(22:50):

And the other thing is, I learned this very early when I was working with lawyers on estate planning. If I wrote to a lawyer and said, estate planning for doctrine, Mrs. There would be a problem. The lawyer would get upset. This is 1990 ish, but when I wrote financial and income tax planning for doctrine, Mrs. That it was okay. And I think that advice would echo in the CPA financial advisor world where if somebody writes to me financial and investment planning for Doctor Mrs. Newhouse, I am probably good with that compared to if they write a state and income tax planning, then I’m like, okay, wait a minute. What’s going on here?

Steven (23:33):

To some of your listeners, that might feel like a very small difference, but I’m with you. It’s a very important difference because if I’m taking the right takeaway from this, you were probably asking the same questions in the email. We’re just setting the conversation up differently. And so if the advisor comes and says, Hey, Bob, I’ve got a question about some financial investment plan I’m doing for Dr. And Mrs. Newhouse and then really buried in there is, Hey, I would really like your help on the tax impacts of that. Even if I’m asking the same question, that’s different than I just leave with, Hey Bob, I’m going to tell you the tax stuff I already did and I just want your rubber stamp on it.

Robert (24:02):

I think there’s a lot you can do, and it’s a matter of always looking at the email or correspondence or phone call you’re going to have and kind of scripting that in your mind. I mean, if you leave a voicemail for the lawyer, it should be very much, we need your help. We’d love your input and not prescriptive. And I think that’s where that’s just we have to work on these semantics. I know it seems meaningless, but it is very meaningful to these other practitioners.

Steven (24:28):

And at the end of the day, it’s going to change the outcome and the experience for your clients. I think for both of us, that’s really what we’re solving for here is the taxpayers experience. This podcast is not just, Hey, treat all the lawyers and CPAs better out there. That’s a nice byproduct of it, but your clients will have higher quality outcomes and higher quality experiences if you take the time to adjust these what might seem like small things and the timing of when you approach a CP or an attorney and how you word those messages and how you collaborate. The client’s the one who’s going to win.

Robert (24:59):

I think that’s exactly right. And there’s just so much value the financial advisors can work to coordinate all this. For example, financial advisors just brought me a rather large estate plan, maybe over a hundred million, but he had wonderful balance sheets put together for the mom, for the dad, for all the trusts who were created over the last 40 or 50 years. I mean, I could just jump right in and start looking at things to do, and I didn’t have to do hours and hours of work gathering all this information. And if that information can be transferred quickly, you add tremendous value and the lawyers and accountants will love you to death if you bring ’em everything where they can just do the highly skilled CPA or legal work and not have to talk to the client about goals and objectives. And so how many children does your fourth son have that can all be organized by the time they get to me. Not that I don’t have to listen to what they want to accomplish, but it’s a lot easier to say to a husband and wife, this is kind of a list of your goals. Is this accurate? Are these your goals? I mean, do they really say that than for me to have to spend a couple hours trying to understand their goals? Now, you still have to do some of that, but I think the financial advisors often do a wonderful job of really pulling all that together and it’s extremely helpful.

Steven (26:27):

Yeah, it absolutely is. And I think just the way you described that highlights part of an answer to another question I get all the time from advisors, which is, well, how do I get CPAs to sending referrals? And that’s a whole nother topic for a whole nother day. But what I want to highlight there is that in my experience, both personally in the CPAs I, the only referrals I ever see CPAs giving back to financial advisors is when they can clearly articulate stories like that where it has nothing to do with your website or what you promised or how good your sales pitch is. If a CPA can say, Hey, here’s how this financial advisor made my life easier, made the client’s life easier, produced a quality outcome for the client, those are stories that get shared. And those are really the only times I see CPAs giving referrals back to financial advisors.

Robert (27:12):

I think you hit the nail on the head. It’s what did the financial advisor demonstrate in the past that made the lawyer or accountant feel good about them? And it’s probably not investment performance. That’s very fickle. I mean, that can change from year to year, but the other things are consistent.

Steven (27:32):

Bob, as we wrap up here, I think a common theme of what we’re discussing is that financial advisors really want to have an impact on this and deliver value to their clients. They do have to be committed to getting educated to staying up to date, to learning more on these things. So what are the top resources you recommend to a financial advisors who want to learn more on these topics?

Robert (27:50):

We have a lot on a couple of different websites and CPA Academy, ultimate State Planner, Lineberg Information Services, there’s a lot out there. There’s other people to watch. They probably beat on your show. Dr. Ross Kins doing a great job out there. And Michael Kitces, of course, everybody’s paying attention to. He has really done a beautiful job in this spot and there’s a lot of good information out there. So I think those are three or four good places to start.

Steven (28:17):

Well, I certainly appreciate that. We’re huge fan of all those resources you referenced. Of course, we’re really proud that our conference got added to Kitces’s list of best conferences for the year. So you can go to retirementtaxservices.com to get signed up for that. If you’re not already coming to join us in September and October. Bob, really appreciate your time today and all that you do for the industry to move these conversations forward. So thanks for your time and coming on the show.

Robert (28:39):

You’re welcome, Steve. Great to be here.

Steven (28:41):

And to everyone listening, until next time, good luck out there. And remember to tip your server, not the IRS.

(28:41):