The client who made $100k… and still didn’t have the cash for taxes

Every year, we see the same pattern: a client starts a new income stream, rental property, 1099 work, or a taxable brokerage account, and gets a surprise at tax time.

One client was thrilled her rental property finally turned a profit… until tax season. She owed far more than expected. Why? No withholding. No system to set money aside. And the income had already been spent. $100,000 earned… $95,000 spent… but the IRS doesn’t care what’s in the bank.

The same thing happens quietly with taxable brokerage accounts: the advisor assumes the CPA is reporting it, the CPA assumes the client has no taxable investments, and the client assumes it’s all handled. By the time the error is discovered, stress is high and sometimes clients take drastic actions, like borrowing money unnecessarily, because they don’t realize taxes are coming.

To prevent surprises, I encourage advisors to:

• Pull current-year income estimates
• Track mutual fund distributions
• Confirm which accounts are taxable vs. qualified
• Explain the difference between cash in the client’s bank account and taxable income

These small checkpoints save clients from headaches and position you as the advisor who sees around corners. They also give clients confidence, knowing there’s a plan makes taxes feel manageable rather than scary.

If you want to go deeper into how we help clients set up withholding, plan for estimated payments, and avoid these painful surprises, this CE-webinar on demand covers all the real-world strategies: Help! I Have a New Source of Income… How Do My Taxes Get Paid?

Happy Tax Planning,

Steven Jarvis, CPA