Sharing is Caring

By Jonathan Harrington, CFP^®, MSFP, MST

It’s tax season, one of the busiest times of the year for many of us. One part of the annual ritual is coordinating with our clients and helping them get their tax return to the finish line before April 15—whether that involves preparing the return yourself, helping a client to prepare it on their own, or working directly with their tax preparer. 

Accounting firms that prepare tax returns for our clients are stretched thin this time of year and don’t have a lot of bandwidth for our “please send me my client’s finished tax return” requests. Due to the shortage of new CPAs coming into the employment pipeline, it seems many tax preparers are half in retirement but still preparing returns out of loyalty or obligation. They want to get their returns done as quickly as possible without any headaches. 

Focus on Accuracy

One of the most uncomfortable and unnecessary conversations to have as an advisor is informing a tax preparer that they need to amend a tax return because you found an error with what they filed. The Monday morning quarterbacking of a client’s tax return is not something I look forward to, and I hate it when I find mistakes because I know they could have been avoided by communicating with the tax preparer ahead of the return being filed. 

Backdoor Roth conversions are one area I’ve seen in the past that are done incorrectly on client returns. But can I blame the tax preparer for not including an 8606 with the 1040 if I didn’t give them the details? No. A simple email to the tax preparer with an explanation would have likely prevented the form omission. 

Realize the Value of Communication

If your firm prepares your clients’ returns, you don’t have to worry about this because the information is shared internally and you can easily communicate with any clarifying questions between the tax and advising sides of the firm. But if you don’t do any tax returns or don’t do all of your client returns, then it is in your best interest to open the door of communication with your client’s tax preparer. 

In addition to backdoor Roth conversions, there are many other tax items that we as advisors recommend to our clients that have a direct impact on their tax return. These include estimated tax payments, regular Roth conversions, qualified charitable distributions, and contributions to donor-advised funds.  

If your client has a taxable account you manage, it will go a long way if you provide some input on the 1099 consolidated that will go to the tax preparer. Take a few minutes to calculate the portion of dividends that are derived from U.S. government obligations if your client can be excluded from state income taxation. If the basis is missing from the sale of non-covered securities, provide it to them. If a corrected version of the form was published by the custodian, make sure they have the latest version.  

Provide a Helping Hand

Another way we can help tax preparers is by taking the time to help a client go through whatever data gathering format the tax preparer has presented. Some of the more tech savvy tax preparers now have online interactive questionnaires that are fantastic—a huge improvement over the old paper organizers that took forever to fill out. 

Going through the data gathering/questionnaire process with a client can be beneficial for both you and them. Allowing you to answer questions on tax items you are aware of will help with the data gathering and is also an opportunity for you to uncover relevant financial information you might not have already known. Helping your client through the process of answering questions and locating the tax documents that need to be attached to the questionnaire can potentially save the client a lot of time, and they’ll certainly value getting an assist from you to make that happen.  

Not every tax preparer is going to welcome your cooperation. But if you’ve provided the information and you still find mistakes after reviewing the completed return, you have a good argument for the client to use your firm to prepare the return (if you provide that service) or recommend another tax preparer with whom you have a good relationship. 

In the spirit of sharing, our firm maintains a comprehensive tax and financial planning guide we coined “Crunching Numbers.” We share it with the greater Fee-Only planning community because we know how much of a pain it is to gather all the numbers when they’re updated annually. Since we have already gathered all the data and put it into an Excel spreadsheet for our internal advisory team, we figure it will benefit the greater advisor community, and we make it available for free. You can find it at https://milestonefinancialplanning.com under Resources—Crunching Numbers. This year’s edition includes a lot of the One Big Beautiful Bill tax aspects that have a lot of complexity in terms of AGI limitations, dollar caps, and time limits. 

Happy tax season! Looking forward to mid-April. 

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Jon Harrington, CFP^® is an advisor with Milestone Financial Planning in New Hampshire and a proud member of the NAPFA community.

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