Clients do the cutest things. Often the dumbest, too, and the smartest, most unpredictable and most damaging to their own tax situation. Confronted with puzzling tax situations, preparers are often left with questions they feel they just can’t ask.
“‘Why are you married to that deadbeat? What were you thinking when you decided to do that? Did you consider the value of your time when you made the decision to do what you did?’” said John Dundon, an EA and president of Taxpayer Advocacy Services in Englewood, Colo.
“Often we learn about clients’ actions after the fact, when there is little opportunity to undo what’s been done,” said New York EA Phyllis Jo Kubey. “Clients come in having set up LLCs or other entities and when asked why say that they did it for the tax savings. Often there are no tax savings. Clients withdraw from a retirement account without realizing that they may be paying close to 50 percent in combined taxes and penalties. If only we’d been brought into the decision making ahead of the transactions.”
“‘Why won’t you take the tax advice I give you?’ and ‘Why won’t you come to me before you make financial decisions that will have a huge tax impact?’” said Carolyn Richardson, an EA in in Costa Mesa, Calif. “I confess I’ve actually asked these questions to clients once or twice when they were being particularly boneheaded about their taxes.”
“Probably every practitioner has occasionally beat their head against the wall when a client shows up in March to have their taxes done – and that’s when you find out they’ve done something that’s going to cost them a huge amount of money,” Richardson added. “Then you become the bad guy for telling them what they owe.”
Some preparers have whittled their wish-list of questions down to one.
“The main question I’ve always wanted to ask a former client is why they didn’t come back,” said EA Terri Ryman of Southwest Tax & Accounting, in Elkhart, Kan. “I’ve never figured out a way to do this, even though the answer might be very enlightening. The times that clients return to me after being gone for several years, they’ve said that they quit because of my fees. But after they purchased software and spent the time to self-prepare their returns, they’re shocked at the IRS letters they received.”
“The only question I ask is, ‘Are there changes in your personal life that may affect your taxes?’” said CPA Brian Stoner, in Burbank, Calif. “Sometimes I like to elaborate on this to get a more complete picture of the client’s situation, but I stop at this general question unless the client wants to discuss it.”
Kubey likes to ask “in a very careful, non-judgmental, non-accusatory manner” a few blank questions. “‘What were you thinking or trying to accomplish when you did blank?’ ‘Did another professional (or non-professional) tell you to do blank and what were their reasons for giving you that advice?’”
‘Ground to cover’
“When a new client walks through your door and sits down at your desk – you’ve got a lot of ground to cover,” said the Income Tax School’s president and CEO Chuck McCabe, in “Are You Making the Most Out of Your Tax Prep Interviews?"
McCabe gives a rundown of what a good tax prep interview looks like, with solid steps to avoid later having to dance around delicate questions:
- Start by offering a beverage and find out how they heard about you. Knowing where new client traffic is coming from is important.
- Every tax interview starts with the basics: names, birth dates, occupations, contact info, Social Security numbers and so on. Don’t just go by what your new client says their filing status is.
- You also need to ask questions to determine any eligible dependency exemptions. “Think of the tax interview as more of a conversation rather than an interrogation,” McCabe said.
- Ask for last year’s return. Ask for all possible sources of income, not just W2s. Sources of income a client might overlook include state refunds (when taxable), Social Security, unemployment benefits, and income from interest, dividends, self-employment and sales commissions.
“There shouldn’t be any question,” said Anthony Santullo, an EA at Santullo Tax and Financial Planning Services, in Berkeley Heights, N.J., “that a preparer can’t ask their client.”
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