Referrals from satisfied clients still top the list of marketing word-of-mouth for tax preparers. But what kind of non-prep professional provides the best business connection?
For many tax preparers, bankers and barristers head the list. Roy Frick, an Enrolled Agent at Ocean City, Md.-based Fairway Services Ltd. and Frick Accountants Ltd., regularly networks with both. “I have two attorneys who refer all of their estate tax work to me,” he said. “Attorneys are also a good referral source when people are buying a business. Bankers also are a good source, as when a new business opens, many times the [owners] ask advice on accounting professionals.”
“Depending on the type of clients you’re seeking, either attorneys or investment brokers are usually most helpful,” said EA Twila Midwood at Advanced Tax Centre in Rockledge, Fla. “While the trend of bankruptcy is slowly declining, working with bankruptcy attorneys can prove to be an excellent network source. Many clients still don’t realize that cancellation of debt may be taxable income [and] a good relationship with the bankruptcy attorneys helps create a solid team for the client in this type of situation.”
Regarding brokers, she added, “Clients coming into retirement age need help determining what to do with their [retirement] plans and how to properly plan for the taxes that may be due when retiring.”
“Realtors are another,” Frick said. “People moving into an area develop a relationship with them and will ask about reputable [local] professionals.”
“A great quid pro quo,” said EA Jeffrey Schneider at SFS Tax and Accounting Services in Florida, who also networks with the “two main professions, attorneys and financial planners. As my client base gets older,” he said, “we try to maximize their retirement plan. I work with the planners providing the information to create a plan.”
Specialization a plus
“Lawyers are probably the best,” Schneider said, “especially those that specialize in estates, trusts and asset protection. Not only do they become my clients, many of their clients come to me with the business and personal tax needs. Most of these professionals can and do Forms 706 and 709 but not trusts (1041), partnerships (1065) or corporate returns. When a new client wants to open or buy a business, the first thing they ask is should they be an S corp, an LLC or other entity. I refer them to a lawyer to discuss the liability issues of each type. Once that’s decided, they come back to me to discuss the tax consequences.”
“An attorney is great for referring estates when their clients die and when their clients’ tax pros die,” said EA Sandy Barrett of Red Rock Taxes in Sedona, Ariz. “In addition, many clients ask us questions that should be answered by an attorney. [My] list includes an estate attorney, a bankruptcy attorney and a business attorney.”
Cheryl Morse, an EA at Emerging Business Partners in Wellesley, Mass., uses “a few lawyers one for audit advice or referral, one for entity formation, another for estate planning and one for financial reporting issues. Although I don’t contact any one of them very often, they are a great resource to have available.”
“The entity formation lawyer is an asset, since we can have a dialogue regarding the best formation for the client’s total financial picture,” Morse added. “Additionally, there is no confusion as to who filed which paperwork. I’ve had clients who thought their attorney filed the Sub S request only to find out it had never been done.”
Morse finds the estate planning legal input a nice value-add for clients. “Since the [IRS’s overseas voluntary disclosure program], financial reporting has become much more complicated,” she said. “We regularly refer clients to an attorney before suggesting that we handle any overlooked financial filings for them. It’s as important to protect ourselves as it is to make sure our client is well informed.”
The right partner can also boost a practice’s emerging niches. EA Mike Habib in Whittier, Calif., for example, likes family-law attorneys. “Innocent spouse tax relief is a growing area of my tax practice and obtaining a resolution for the client is a win-win,” he said.
Taxing authorities themselves often grease the wheels for referral partnerships. “When taxpayers who have no preparer or only a seasonal preparer receive an IRS notice threatening a lien, levy or other action, they often call on their attorney for help. Most attorneys want nothing to do with it, so it becomes an instant referral,” said John Walker, an EA at J. Walker & Co.inConcord, N.H., who also likes to work with attorneys, “particularly those in solo practice or [with] small firms and those specializing in family law, estate work, or bankruptcy.”
“When someone dies, the family always calls an attorney (assuming they have to go to probate),” Walker added. “But there is tax work that must be addressed too: a final 1040 for the deceased and maybe a small estate or trust return. There may be qualified retirement accounts involved where the beneficiaries need to understand the tax options and consequences before simply cashing them out.”
All returns must be filed before a bankruptcy-protection filing, Walker pointed out. “Once filed, individuals in bankruptcy must meet all future filing and tax payment obligations,” he added.
Don’t Know Anything About Investing’
An “investment advisor is great if you need help determining the cost basis for stock your client sold and, of course, has no idea what he or she paid for it,” Barrett said. “Secondly, they’re great about referring new clients. If you have a good investment advisor that is, one not looking to sell clients things they don’t need to make a great commission then clients, particularly those who inherit money and don’t know anything about investing, are good referrals to the advisor.”
Morse uses financial planners most to handle her own firm’s company retirement account (not to mention her mother’s money). Such trusted planners allow for “a big-picture approach when planning for a client. The clients feel that I’m taking good care of them, and it builds loyalty. As a bonus,” Morse added, “the financial planners also refer clients to me. But I’m happy to simply be able to provide another service to my clients.”
Morse finds a lot of help not from fellow professionals but from tax authorities. “My contacts at the IRS or state department of revenue have been the most helpful,” she said, adding that she also makes good connections as a speaker on her state’s tax seminar circuit.
“Recently I (was) trying to fax information to the IRS at the number listed on the notice my client received,” Morse added. “I called the number on the notice and was told to fax to the number I had been faxing to. With a deadline near, I contacted someone I know from the IRS. She looked into it and discovered that the fax number had been disconnected even though it was still on notices and recordings. She gave me a name and another number to fax the information and was able to alert the IRS to a problem they had.”
Steven Hanson, a CPA with Piehl, Hanson, Beckman PA in Hutchinson, Minn., finds that a traditional tool of good advertising word of mouth works best with professionals for referrals, too.
Some contacts come through formal reciprocal business arrangements and some from other avenues. “Yes, other professionals’ referrals help,” Hanson said, “but we also get many referrals from people in organizations like Rotary or the Lions Club and even church and school. You never know where that next referral or client will come from.”