RTS #050 The Tax Phrase That Pays

You can have all the tax knowledge in the world, but it’s only valuable if you know how to communicate that knowledge effectively to your clients and prospects. All credit to Matthew Jarvis, CFP®, for this particular phrase that pays around taxes, but I’ve heard from countless other advisors who have used it successfully as well:

“And what did XYZ advisor say when they reviewed your tax return?”

The beauty of this simple phrase is that it establishes the precedence that all advisors SHOULD be looking at tax returns (and obviously, they should, in fact, be doing that), and it implies that you would, of course, look at their tax return if you worked together. This works fantastically whether a prospective client has an existing advisor or is interviewing other advisors, but there is a catch…

If you are going to ask this question, you have to be able to back it up. You have to be able to review their tax return and deliver massive value. That doesn’t mean you have to be a CPA or have a PhD in accounting, but you better be comfortable reviewing a tax return for your ideal type of client and be able to learn from it, spot potential issues, and identify potential opportunities. If you are new to this you don’t even have to commit every line of the 1040 to memory, you can start with a couple of key items relevant to your niche and build from there.

If you work with high-earning mid-career professionals, you better be familiar with lines 1 and 7 to help identify potential issues around stock-based compensation, help clients avoid double taxation, and understand how and when taxes get paid.

If you work with clients who are maxing out their employer retirement plans and looking for more ways to get money into qualified accounts you better be familiar with line 4 and form 8606 so you can help them navigate backdoor Roth contributions and have that be a valuable experience instead of a headache.

If you have clients transitioning into retirement who would benefit from Roth conversions better be able to quickly understand what tax bracket they fall in and how they should be looking at relatively low income tax years to take advantage of intentionally accelerating income to cut the IRS out of the picture for the future of their money.

No matter who you work with,, you need to be able to articulate how much of their hard-earned money the IRS is keeping (line 24) so you are working from the right baseline as you help them sand off the rough edges of their retirement tax bill.

To do any of this you have to be getting real tax returns and getting the reps in practicing and honing your skills for reviewing tax returns. Start with your own return. Review your team members’ returns. Use a checklist or reference guide or whatever tool helps you do this efficiently and effectively but make sure you are putting in the work so you can use tax planning as a true differentiator to land new clients and serve existing ones.

Happy Tax Planning!

Resources that can help you transform the tax return review process:

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The tax code is 80,000+ pages and Google has 875,000,000 results when you search “Tax Planning”, so each week we are going to help you wade through all of that noise and get to the Relevant Tax Stuff.