RTS #059 The IRS loan your clients don’t know about
Nobody likes paying taxes. Trust me, I’ve had thousands of conversations with taxpayers and financial advisors, and not a one has been with any enthusiasm for Aunt IRS taking a share of their hard-earned income. So why isn’t “tax planning” as a tag line on your website enough to have prospective clients flocking to you in droves?
For most of your would-be clients, taxes are an annual irritation, but not something that feels like a solvable problem. You have to help them with that perspective. Here’s where the IRS loan comes in. When your clients get their 401(k), IRA, TSP, pension, etc., statements, they just look at the total balance or expected benefit. Those statements DO NOT show them the portion of their hard-earned money that belongs to the IRS. You may intuitively know that somewhere between 0% (almost never the case) and 50+% (yes, it goes that high with state taxes) will be confiscated by the IRS.
Saying, “We do tax planning,” is not persuasive. Helping prospective clients do the back of the napkin math on just how much of their retirement accounts could potentially go to the IRS is a powerful way to start a conversation. That, of course, needs to be followed by getting a copy of their tax return and giving them specific areas you can help to sand off the rough edges of that IRS loan so they don’t tip the IRS. Don’t get carried away and turn this into a time-share presentation. Make it clear that they should be paying every dollar of tax they owe, but there are no patriotic duties for tipping the IRS. Great client experiences are not created by overpromising and under-delivering. Instead, help clients understand the small things you can consistently help them do over the next 10, 20, or even 30+ years that will dramatically change the amount of their hard-earned money the IRS keeps.
Delivering on this takes a proactive and intentional approach, so make sure you have a system (or use ours). Don’t wait until next tax filing season, take action now.
Happy Tax Planning!
P.S. It’s not just their income tax bill; make sure they understand “shadow” taxes like IRMAA and the choices they can make to lower their bill on healthcare in retirement as well.
