Click Here To Listen To The Retirement Tax Services Podcast
Are you trying to learn how to deliver massive tax value to your clients? Then look no further. Retirement Tax Services Podcast, Financial Professional’s Edition is a show hosted by Steven Jarvis, CPA. Steven aims to bridge the gap between tax professionals, financial advisors and their mutual clients in their quest for reducing tax expenses in retirement.
As we approach the final few weeks of 2022, it’s an important time to review our clients’ documentation and ensure everything is in place for a smooth tax season ahead. So, how can we help our clients prepare for tax season? And what can we do to ensure we’re adding value to their lives rather than extra work or stress? Johnna Long, CPA, is joining the show to share several things you can do to be prepared for the end of the year and tax filing season, including some missteps to avoid along the way.
Listen in as Johnna explains what you can help your clients avoid as it relates to pain and taxes, as well as her advice for communicating with the IRS. You will learn the importance of having good documentation, how to build a relationship with a client’s CPA as an advisor, and why you should always start this conversation as early as possible with your clients.
Steven and his guests share more tax-planning insights in today’s Retirement Tax Services Podcast. Feedback, unusual tax-planning stories, and suggestions for future guests can be sent to email@example.com.
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We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.
Steven Jarvis: Hello everyone, and welcome to the next episode of the Retirement Tax Services Podcast. I am your host, Steven Jarvis, CPA.
And with me on the show today, I have a fellow CPA and returning guest, Johnna Long. Johnna, welcome back.
Johnna Long: Thank you for having me back. I’m happy to be here.
Steven Jarvis: Yeah, I’m always excited to talk to other CPAs who see the vision of let’s look for ways to add value, not just let’s see how many returns we can grind out.
And unfortunately, I can’t find a lot of those CPAs, so I’m more than happy to have you back on the show to talk about the things we’re doing and seeing, and ways we can help taxpayers.
Johnna Long: Well, I will always come back and I’m excited to be that representative. Maybe the one and only, but I’m here to represent us.
Steven Jarvis: Yeah. Our audience continues to grow, so we probably have a lot of listeners who haven’t heard your first episode, please go back and listen to it.
But Johnna is a CPA. Similar to what we’re doing here at Retirement Tax Services, she saw kind of the vision of this collaboration between advisors and tax professionals and has really embraced that as well.
And so, today, what we want to talk about is just kind of sharing our thoughts on getting ready for the end of the year. As this airs, there’s only a couple of weeks left until the end of the calendar year, which then puts us right into tax filing season.
So, we’re just going to kind of share some things we can do to get ready for the end of the year, to get ready for tax filing, and then maybe some things that advisors can help their clients avoid as it relates to pain and taxes.
So, Johnna, I’ll let you go first. As you think about these last couple of weeks until the end of the year, what are things that advisors, that taxpayers should have in mind of what do we need to get done before the calendar year turns over?
Johnna Long: Yeah. I mean, I think if we look at it from a perspective of the taxpayer has things to do, we as CPA professionals have things to do, and then advisors have things to do as well, I think about it kind of in a three-part factor.
Really, as a CPA, our job is to start poking at people. I’m sure you ran into this many times where it takes people way longer to get things than they anticipate. And there’s things that they can still do really before the year ends.
And mind you, there are things that probably should have been done right now. So, I’m not going to start making any crazy suggestions and make enemies out there with advisors.
But you could still make estimated tax payments at the end of the year. You could still make charitable contributions, those type of things.
So, we as CPAs can remind our clients that there are minor things that can still easily be done through the end of the year, but really, I think it’s on the onerous of our clients to start gathering all their documentation and the wealth advisors to be there to provide that documentation. And not just provide documentation, but good documentation for us, right?
Steven Jarvis: Yeah, that’s the ideal, that it’s good documentation.
Johnna Long: That’s my plug.
Steven Jarvis: Yeah, yeah, please, please make a good documentation.
Yeah, Johnna, you’re absolutely right that with just a couple weeks to go, this is not the time to start talking to your clients really just about any sort of 2022 tax planning.
The conversations need to have already come up by now. You might still be executing on some of those — and that’s fine if you’ve already got it in motion, you’re just finishing out the year.
But if you’re listening to this early in December and you’re thinking, “Hey, I should start calling my clients and bringing up for the first time some of these tax planning ideas,” you’re probably just going to end up creating more problems than solutions you’re going to provide.
So, maybe, you put a pin in it and make sure you get to it earlier next year. But absolutely, getting ready for those fourth quarter estimated payments, of course, making sure those are done online and not mailing checks to the IRS.
Johnna, you’re welcome to push back on me if you’re sending everything via mail to the IRS, but personally, I’m trying to help as many people avoid that as possible.
Johnna Long: I will absolutely echo what you’re saying, Steven. I think the whole fact that the IRS is hiring so much more people is irking a lot of people, it’s worrying a lot of people.
But the reality is they have so much work to catch up with. They have so many phone lines to man, they have so much work to be done that I wouldn’t take that as, “Oh, they’re going to have plenty of people to cash my check.” Absolutely do everything online, avoid any emailing if at all possible.
Steven Jarvis: Yeah. I think that really shows the difference maybe in philosophy of the people in the trenches doing tax preparation versus taxpayers or even advisors.
A lot of people see that, “Hey, the IRS is going to hire these people,” and it’s just fear. It’s, “People are going to be knocking down my door trying to steal my cat,” whatever it is, that goes through their mind of worst-case scenario.
And for those of us who got to get these things processed, I don’t know that 87,000 is necessarily the right number, but they certainly need more help with the IRS to get these things processed to get caught up on this.
It’s not going to change how I approach tax planning with clients, but regardless of how many people they hire, we’re definitely doing things on online, not through mail.
Johnna Long: I couldn’t agree more.
Steven Jarvis: So, Johnna, let’s move ahead a little bit then. If we’re running out of time for the end of the year, that doesn’t mean we’re out of time for planning across the board for 2022 because there are some things that don’t have a calendar year-end due date.
So, what are some of those things that as we get into the beginning of the year, that advisors should be keeping in mind that are still opportunities from a planning perspective?
Johnna Long: Yeah. I mean, the biggest one I think is a lot of different retirement plans do not have a requirement as of year-end to have your contributions done by the end of the year.
A lot of them are through the beginning of the tax deadline, which would be 4/15. I want to say it’s 4/17 in 2023. So, I would say make sure that your clients are maxing out on those contributions is a great opportunity to get a little bit more of the income in there.
And then again, the estimated tax payments, while it is still a year-end thing, Q4 estimated tax payment is not due until January 15th. So, that’s another thing to think of.
Mind you, what Steve and I are saying is don’t wait until last minute. But there are still those tiny things that you could think of. Like there’s lost harvesting you could have a conversation with your client of.
But I would say too, and you know the clients that are going to be receptive towards having any of these conversations close to year-end of … the clients that are willing to be a little bit more aggressive and progressive in terms of planning.
Those ones you could maybe have the conversation with, but I do not recommend going out and sending a wide email advertising these things to them.
Steven Jarvis: Yeah, definitely. We want this to be a value add, not a distraction or a frustration.
And there’s some of those contributions (solo 401(k)s come to mind) that a lot of times it actually makes more sense to wait until closer to the filing so we have actual numbers, we know how much we can contribute. Because there’s going to be situations where that’s not a clear-cut number until we’ve seen what the final outcome for the business is.
Even for our non-business owners making just IRA and Roth contributions outside of a retirement plan can be done through the filing deadline. We got to make sure that if we’re in the calendar year 2023 and we’re making contributions for the tax year 2022, that that is really clearly spelled out as those contributions are going to made.
I definitely see that go wrong at times. That’s not clearly articulated. And if we’re in March of 2023 and we’ve made a contribution that we thought was for 2022 but got accounted for, for 2023, now, we get towards the end of 2023 and we’re trying to make a contribution we already have …
Anyways, it creates a big mess, to your point, if that documentation isn’t clean, if that documentation isn’t good. We got to make sure that as the calendar year cuts over, but we haven’t gotten to the filing yet, we’re being really crystal clear on which tax year we’re trying to address things for.
Johnna Long: Absolutely. And I have certainly had that be the case where we run into it and then you’re being penalized by the IRS.
And circling back to the lack of IRS agents out there on the ground right now, takes a very long time to get someone on the phone and a very long time to unwind a situation like that, that could all be resolved by proper documentation in the front end of things.
Steven Jarvis: Yeah. The last time I tried to call IRS (which is not very often, we do everything we can to avoid calling the IRS), I think it ended up taking me about three days to get on the phone with someone.
I mean, I’m sure you’re very familiar with this pain. But for listeners who haven’t had to call the IRS themselves, I mean, I envy you. But you call, there’s this like two-minute automated message, and most of the time, you get to the end of it, and then it tells you that there’s no one who can answer, so call back another time.
And then you just go through that cycle over and over and over again, until you get through and then you can leave your number, they’ll call you back, and when they call you back, you still have to wait for another …
Anyways, it’s a whole big mess. So, yes, if we can avoid calling the IRS, which best way to do that is to document these things, report these things correctly the first time.
So, for advisors listening who are thinking, “Hey, that’s nice that we’ve got two CPAs on a podcast complaining about how hard taxes are,” think about what this means for your clients, for the taxpayers. If you can be part of making their life less painful around taxes, that is a huge value add, and you will get the credit for that.
I work with advisors all the time and even though the taxpayers see me as the tax guy, they see our team as the tax people, they still know who introduced us to them.
They still come back to the advisor and say, “Thank you so much for getting us on board with RTS.” And so, you will get credit for helping your clients get through this effectively.
Johnna Long: Well, I think to your point too, when you’re able to offer that piece of an advice, it just seals that shared relationship and that really coming to the table as a team, as a CPA advisor and a wealth advisor.
And that shows that you do have communications on a regular basis and that you are working together to make sure that your client’s experience is the best experience, A.K.A. not having to deal with the IRS because something wasn’t properly documented or properly done in time.
Steven Jarvis: Yeah, it’s a great reminder.
As we get into tax filing, in my mind, there’s kind of two different buckets of information. There’s the data that comes from 1099s and W-2s in your standard tax documents, and then there’s the context which hardly ever comes through on those tax documents.
And so, this is where the advisor can play a really integral role in proactively making sure that the client has a good tax filing experience.
Johnna, you talked, before we hit record, about a situation that definitely comes up at times that advisors can have a huge impact on. And so, I’ll let you share that one and then I’ll tag on a couple others.
Without the advisor, it’s very unlikely the tax preparer, the CPA is going to get it right. Not because they don’t have the technical skills but they don’t have the information.
So, I’ll let you go first and we’ll tag on a couple more of things that just kind of inherently go wrong if we don’t have advisors providing us the right context.
Johnna Long: Yeah. I mean, what we were getting into and what immediately comes to my mind is any type of basis for stock sales. A lot of times, 1099s do not have that information or have the proper information.
And unfortunately, if as CPAs were not able to find the basis of a stock that was sold, whether it be through stock options or through inheritance or whatever the situation may be — if we don’t have the date that the stock was given, anything that really can get us to the basis. What that means is that we have to assume that the basis is zero.
What that means is the entire sale, that stock now becomes taxable, and no one is going to be happy about that. Certainly, you’re not going to be that happy about that, the client’s not going to be happy about that.
And so, having that type of information readily available for us as CPAs, especially because you are on the frontline of making those sales of the stocks over the year, that can be a huge make or break for your client.
And a CPA’s going to be happy to give you credit that, “Hey, so and so, your advisor was able to get me that information.” Especially if it’s making our lives easier and we have the pleasure of going to our clients saying, “You’re not owing any additional taxes because we have everything we need in place.”
That by far, to me, is the biggest example that I’ve seen happen and where we can run into a lot of trouble and a lot of additional taxes for our clients.
Steven Jarvis: Yeah. Paying tax on money that you really don’t have to, that’s got to be one of the worst ways to tip the IRS. As this airs in December, for advisors listening, this isn’t something … the takeaway here shouldn’t be, “Oh, if the CPA asked me in March, I’ll provide that information.”
This is where you can proactively help your clients because that’s ultimately, what it is. This might sound just like a pitch for, “Hey, we need all the advisors to make CPA’s lives easier.” I mean, that’s kind of a side benefit. But what you’re doing is helping your clients by — Johnna, to your point, as advisors are working with clients to sell stock, to sell other assets, they might not always have that basis reported.
In a perfect world, yes, the basis is there but there are plenty of situations where that gets lost along the way and there’s a little bit more digging that needs to happen. So, doing that up front, setting your client up for success, that’s definitely information.
We talk often at RTS about advisors providing what we call a 1099 letter or a year-end tax summary letter that they can give to their clients that says, “Hey, here’s all the great stuff we did together this year. Here’s the accounts that you should expect to get 1099s from. Here’s where we sold stock that might not have had a clear basis or that we did charitable giving or Roth conversion,” or whatever it might be.
Proactively providing that type of information is going to be a game changer for how your clients experience tax filing season.
Johnna Long: Absolutely. And I think one of the biggest things that (for those who didn’t listen to the podcast that I joined Steven on before with) we talked about, is what happens at times, people often forget about all the good that you did as an advisor.
Meaning, you made them a ton of money, their portfolio growth. Those are all the exciting things that they get to experience throughout the year, but people have a tendency to forget those types of things.
So, if you send them that reminder in December, it’s a little nudge to say, “Hey, we did all this greatness for you, and there will be some tax consequences that are going to be coming, but we’re giving you a heads up that they’re coming and now, we can work with your CPA advisor.”
That’s where you get that win-win collaboration and you are being proactive in saying, “Hey, there’s taxes to come, but just a reminder, we did all this amazing stuff throughout the year.”
Steven Jarvis: Yeah. That’s such a great way to look at that of not only are you setting your client for success as they file their taxes, but you’re reminding them of all the things you’ve done throughout the year.
Because there are some other areas where if as the advisor, you are not providing the context, things get misreported all the time, especially around … I see this all the time with backdoor Roth contributions because the 1099 is not very helpful. Same with qualified charitable distributions. The 1099s on these types of transactions are just not helpful.
And if you’re leaving it up to your client to relay that information, no offense to your clients, but it’s not happening. These are complex areas, especially for your typical taxpayer.
As an advisor, you might come across these things dozens of times a year. As a tax preparer, we probably come across them hundreds of times. But for your individual clients, they come across this at most once a year, maybe once every couple of years. They are not going to relay the information correctly.
In fact, sometimes the client trying to relay the information makes the situation entirely worse because they get some key terminology wrong, and then we go off down the wrong rabbit hole.
It’s one of my favorite things about collaborating with advisors through RTS, is that when a taxpayer comes to me, really with anything that they say, “Hey, I worked with my advisor this year to do X, Y and Z,” I immediately just go to the advisor and say, “Hey, Bob and Sue mentioned you worked together on this, just want to make sure I have all the details.”
And more often than not, the advisor says, “Yep, that all sounds great.” Every now and then they say, “Oh no, no, no, no. Bob and Sue are like thinking of something else. What we actually did was …” And then we get pointed in the right direction. We save everybody a lot of headache and hassle.
Johnna Long: Yeah. And I think that all just goes back again to just being proactive and planning together.
If you’re aware too, I’d say as an advisor that something complicated happened throughout the year, and it’s not going to be properly documented, that’s also a good time to reach out to your CPA that’s working with your clients.
And if you haven’t had that introduction, make that the time to have that introduction because all that does is make you look like a proactive advisor in the client’s eyes, and then make sure that the CPA gets things right.
And likely if there’s something complicated going on and you wouldn’t be able to tell by the 1099, something may get mistreated, not by the fault of either side, but it is a documentation that can be a little vague, and then your client could end up owing more taxes than they’re supposed to.
We as CPAs want to avoid that just as much as you guys do.
Steven Jarvis: Yeah. We might want to avoid it even a little bit more because usually, we’re the ones that are having to tell the client, “Hey, you owe the IRS a bunch of money.”
Johnna Long: We always get to hold the bag at the end of the year.
Steven Jarvis: Yeah, no kidding. I like that you highlighted in there that it’s not necessarily at the fault of either party. Because as we have this conversation, this isn’t about pointing fingers or saying, “Hey advisors, you need to clean up the CPA’s mess or CPAs you need to clean up the advisor’s mess.” We’re trying to solve for what’s going to be the best experience for the client.
And yes, I am more than happy to take the added benefit that it makes my team’s life a little bit less complicated, it makes it a little bit easier for us to do our jobs. But really, what it does is it gives us more time to proactively and intentionally add value.
So, now, instead of chasing down stock basis, we can get the tax return prepared and drafted and share with an advisor, and now we can start thinking about what are those forward looking planning opportunities. Where do we go next? How do we continue to improve the amount of value that we’re providing to these clients.
Johnna Long: Absolutely. And what you’re saying about looking at the tax return together, I think that it’s just another opportunity to continue to build that relationship. And I’ve had a lot of wealth advisors ask me, “How do you build those relationships with wealth advisors? Or how do I connect with my CPA?”
Reach out about the tax return, ask questions. If your CPA’s willing to do that, then there’s a good opportunity for you to start building that relationship and start sharing that wealth of information back and forth.
So, I think that building that relationship really starts with you’re the feeder of the information to us as the CPAs, and how you feed that information can really make or break your client’s experience at tax times.
So, just a reminder again, that we’re working together, it’s for the client’s best interest.
Steven Jarvis: Yeah, I like that you’re highlighting how important it is to reach out to the CPAs, the tax professionals in your clients’ lives. It’s really important how we do that, and I think you’re hitting on that already.
We got to do this early and often, we’ve got to do this from a place of collaboration. The words we use matter. And so, reaching out and saying, “Hey, I want to make sure this doesn’t get messed up again,” that’s not going to make any friends.
Reaching out and saying, “I was working with a CPA, with another client on X, Y and Z on stock basis, on charitable contributions, on Roth conversions,” whatever the topic is. “I was working with another CPA, and they were able to help my client save taxes using …” whatever strategy it is; “Is this something we could talk about with our shared client?”
Giving them a point of reference. It might feel unfair, I’m sure it feels unfair to advisors listening to this, but CPAs tend to get the benefit of the doubt when it comes down to what profession taxpayers are going to give credit to. And do we deserve that?
I don’t know, maybe. There’s CPAs in jail too. But I think in general as a profession, we’ve kind of held ourselves out as we are the technical experts on a lot of this. But there’s so much room to add value beyond that if you can engage with your client’s tax preparer in a collaborative way.
So, reaching out early, “Hey, I was listening to a podcast, a couple of CPAs talking about getting ready for tax season. I just wanted to get your perspective on what I can do to make your life easier for the clients that we share.” Things like that.
In this December, January timeframe, because by the time we get to February, March, you’re not going to get responses to any of those emails. They’re going to be heads down, grinding things out.
So, you’ve got a short window to reach out. And then we get into tax filing season where if you’re going to send something to a CPA that’s not specifically related to preparing tax return, probably should be a gift basket or a comically large bottle of Advil, those kinds of things.
Johnna Long: Gift basket, wine, Advil.
Steven Jarvis: Perfect. Johnna, as we get ready for the calendar year to turn over and you’re getting back to your next tax filing season, maybe two things.
What are some things you’re looking forward to as far as being able to help clients, and then what are some things if you think back on this last year, that you would love to see improve or go better or that maybe just causes you a little bit of anxiety as we come to this time of year?
Johnna Long: Oh, I think that’s really two pieces for me. One, last year, we did a lot of Roth conversions with how the market was going, and just what people are experiencing getting closer to retirement.
I’m excited for them to see the money that they were able to convert and how little the taxes that are going to come out of that. We’re really strategic with keeping our clients certain tax brackets.
So, historically, I wouldn’t have said I’m excited for them to see their tax bills because it’s not always a great time. But we really worked hard to working with wealth advisors this year, having tax partners to make sure that we were actually taking advantage of the tax planning strategies it could.
So, going in this tax year and seeing those end results, I’m just so thrilled to share those with my clients and continuing to have those conversations, strengthen those relationships and keep being proactive.
So, tax years and tax seasons, I’m not going to say they’ve become exciting, they’re never going to be exciting for anyone to see their tax return, but they’re going to get better.
Like these things are going to get better and they’re exciting in the standpoint of, “Okay, that wasn’t as bad as I expecting and I can see all these end results from last year.” So, that’s what I’m really looking most forward to.
Steven Jarvis: I love that you highlighted that. That’s definitely something that I can relate to, especially since similar to what you’re doing, we have this emphasis on working with financial planners.
That if we’re proactively planning instead of tax filing being this painful, “Cross my fingers and hope for the best, I don’t owe the IRS a whole bunch of money,” we’ve proactively planned. This is a time, really to your point, to celebrate the great planning we’ve been able to do together.
It’s always going to be a little bit painful seeing just how much money the IRS keeps out of your hard-earned paychecks. But being able to celebrate and highlight the proactive planning definitely changes the game.
I love being able to review a tax return draft with someone to say, “Hey, yep, here’s what you refund is, how much you owe. But as we go down the 1040 here, here’s where we reported this planning that we did together.” Or, “Here’s where we were able to reduce your taxable income through whatever strategy is we’re working together.” I love being able to do that.
Definitely, it’s a game changer in how you get to interact with those clients. For me, it definitely takes a lot of the pain out of it compared to what it was before I worked so closely with financial planners on these things.
Johnna Long: Yeah. I mean, for me, it’s a lot less transactional at this point. It’s a lot less, “Here’s your stuff, I have no idea what’s been going on with you all year. I’m going to do the magic behind the curtain and whatever result you get is whatever result you get.” So, couldn’t agree more.
Steven Jarvis: Yeah, it can definitely feel like a black box to clients of what happens.
In fact, I was recently speaking to a group of advisors at a conference talking about what the tax prep process typically looks like for a lot of taxpayers. And to your point, of that happens behind a curtain and no one’s not really sure what’s going on.
I think for a lot of taxpayers, what it feels like is they get a 40 or 50-page organizer, they don’t really understand and don’t know how to fill out. They do their best to kind of accumulate all their tax documents, they send it to their CPA.
And then at some point … this is mind-blowing to me that people would do this, but it happens all the time; I know taxpayers who work with CPAs who won’t even send them a draft, they just send them, “Hey, the return’s done, here’s how we’re going to file it. Talk to you next year.” Like there’s little to no conversation and then there’s like 11 months of silence.
And that might be a little bit overly dramatic. But for a lot of taxpayers, a lot of the listeners of this podcast, a lot of your clients, that’s what they’re experiencing and that’s it. Like there’s so much room to change this and add more value to it.
Johnna Long: I mean, you’re not wrong. I have a new client that just on boarded and part of their frustration was their prior year CPA came up to them the Friday before the Monday deadline and was like, “You’re going to owe a $100,000 worth of taxes.”
Steven Jarvis: Yeah.
Johnna Long: And those unfortunately, are situations that happen on a regular basis, especially with CPAs starting to become further and fewer between. And really CPAs not working with wealth advisors.
If we don’t know what’s going on throughout the year, that is the type of end result that will happen over and over and over again.
Steven Jarvis: Yeah, I would love to find a whole group of CPAs, Johnna, that you and I could create a mastermind with or have our own little conference and talk about all this stuff. It’s hard to find them.
So, for advisors listening, obviously you can reach out and work with RTS, especially if you’re in the Seattle area. We’ve got Johnna’s information linked in the show notes. Reach out to her.
But most likely, this is something that you’re going to have to strategically build relationships with CPAs if you want to have this kind of relationship as well. It can absolutely be done. I know advisors who have done it successfully.
It takes time, it takes a real commitment from your side. Don’t wait for the phone to ring of that unicorn CPA calling you and saying, “Oh, hey, I was just thinking today that maybe I should collaborate with all the advisors I know.”
Johnna Long: Yeah, don’t wait for the phone ringing. Steven’s point earlier, don’t wait until we’re filing the tax returns. Like I think the bigger picture of this conversation is you are in a key time to start thinking about year-end and tax planning and really the tax planning at the year-end for the filings.
So, take advantage of that. Reach out early and start those conversations earlier.
Steven Jarvis: Yeah, absolutely. Johnna, anything that you’re just absolutely dreading as we come up to this next tax filing season? This is your chance to get it off your chest.
Johnna Long: This is a loaded question. I think really, it’s just, I strongly encourage this to taxpayers, to wealth advisors, to anyone involved in the process. The longer you wait to turn in your things, the harder it becomes on all parties involved.
We as CPAs want to make sure that we have enough time to do things accurately, do things well, do things when we’re not sleep-deprived and really give you the opportunity to look over things and ask questions and understand things.
And I mean that from both a wealth advisor perspective and a client perspective. So, the sooner you get your information in, the more we can help you and work for you and work with you, is what I would say.
I know that was a little bit of a call to action, but if I’m not here to complain and do a call to action, then nothing is going to happen.
Steven Jarvis: No, I love it that you went right to how do we take action on this.
And maybe a lens to think about this through for our listeners, for advisors to communicate to their clients: it can be easy to fixate on the deadline (this year, it’s April 17th), but you really got to think of what you want the outcome to be.
Because if you submit everything to your CPA on April 10th or April 14th or 15th, there’s basically not even time to even do the return right, let alone look for planning opportunities or really critically analyze the information you’re given.
And so, if the outcome you’re looking for is just to check a box the return was filed, great, wait as long as you’d like and maybe find a different tax preparer next year.
But if you want somebody who’s going to critically look at and identify planning opportunities, who’s going to ask good questions, who’s going to take the time to review a draft with you, to implement all these different things, you’ve got to allow for that time in when you are providing this documentation.
So, then we start backing it up and saying, “Okay, I need to go into the end of the year with an idea of what I should expect to have, what I’m going to need for tax season. In January, maybe early February, I’m on the lookout for the tax documents to come in. I’m providing those proactively as I get them.”
And again, yes, it makes our lives easier, but ultimately, it helps the taxpayer because now we’ve created this longer window where we have time to go above and beyond and add more value. So, yeah, I love that.
And really, that’s the first action item for this conversation we’re having today, is to make sure that you are proactively … so, for advisors listening, it’s for yourselves as well, you have taxes to file too (for yourselves and for your clients). Make sure you’re proactively thinking about the timing of these things.
That you’re getting the documents, you’re getting the answers to your tax professional as early as possible so that it’s reasonable for you to expect to get more out of the process than simply filing a tax return.
Johnna Long: And I think to that point, if you’re not sure what you need, you can always reach out to your CPA earlier rather than later. To Steven’s point earlier, the sooner you reach out to us, the more likely you’re going to get a response quicker and you’re able to have those conversations with us.
Steven Jarvis: Yeah, absolutely. Johnna, as you think about our conversation today, I mean, you really kicked it off with that first one. I just summarized it there for us. I mean, what other actions would you recommend to wealth advisors listening to this as we get to the end of the year and into tax filing season?
Johnna Long: I think you said prepare your documentation, prepare your clients too. If they had huge years in terms of capital gains (and hopefully, you’ve been doing this throughout the year), but let them know that they will have some sort of tax ramifications for it and to talk to their CPA about it.
But I think preparing those documentations and just developing some sort of expectations in advance is a really helpful thing to do.
We spoke about this earlier this year, but I think that one of the common things that I ran into, and I believe, Steven, you said this too, is we would prepare tax returns not knowing that they had these huge capital gains and then having to deliver the news that they did have a high tax liability.
And while that’s great news, it doesn’t sound so great when they’ve forgotten about all those things that happened sometimes over a year ago.
So, develop documentation, develop expectations. If you have questions, reach out to your CPA earlier. Those are the big-ticket items for me that I’m thinking about.
Steven Jarvis: Yeah. One of the things that you said in there that stands out to me is talking about capital gains. Because there might be some people listening who think, “Well, wait, the market’s down 20%, why are you talking about capital gains?”
But that’s going to be a reality for some of your clients that they still have capital gain distributions from their portfolios. And even those conversations that you were mentioning were certainly painful last year, but they’re going to be even more painful this year if your clients aren’t expecting capital gains distributions and then their CPA has to tell them they owe more in taxes.
Because of course, your client’s going to immediately think, “Well wait, the market was down. How do I have capital gain distributions?” But those capital gains can build over years.
So, great, great reminders there. I really appreciate that.
Johnna, thanks so much for taking the time to come back on the show and share your insight. Really appreciate having you here.
Johnna Long: Yeah, thank you so much. Like I said earlier, I am so happy to be back and thank you for inviting me and I’ll come back anytime.
Steven Jarvis: Perfect. I love it. For everyone listening, thanks for being here. Until next time, good luck out there and remember to tip your server, not the IRS.
We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.
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