How Long Does It Take You to Create a Tax Plan? [Episode 107]

It’s easy to get caught up in playing office and feeling guilty for having more in-office time, but how much time should things actually take? In this episode, Matt and Micah share how they set up task time frames for themselves and their teams. They also explain the importance of providing tax planning services to your clients and why it shouldn’t be overlooked.

Listen in as the guys discuss the issues that pop up when you think, “it’s just faster if I do it myself.” You’ll learn how not to fall into that trap and, instead, find solutions that are realistic, time-efficient, and work for you and your team. They also cover Parkinson’s law and how to set up forcing mechanisms that ensure you’re spending the right amount of time on helping clients with taxes and other matters.

Listen to the Full Episode:

What You’ll Learn In Today’s Episode:

  • The importance of setting turnaround time expectations.
  • How to realistically decide how long a task should take someone on your team.
  • Why tax planning is important for advisors and clients.
  • Parkinson’s law and why you need forcing mechanisms.
  • How to go through a tax return (quickly).

Ideas Worth Sharing:

The behavioral progress you get from saving a lot of client money on taxes is disproportionate to the dollar amount. – @ThePerfectRIA Click To Tweet With tax planning and IRS code change, we can consistently deliver massive value to clients on a routine basis.– @ThePerfectRIA Click To Tweet Sometimes we’re looking for this exotic strategy, but it can be the simplest thing. – @ThePerfectRIA Click To Tweet

Resources In Today’s Episode:

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Read the Transcript Below:

This is The Perfect RIA, in case you didn’t know. Bringing you all the strategies to help your business grow. Are you happy? Are you satisfied? Are you hanging on the edge of your seat? Sit back and listen in while you feel the beat. Another myth bites the dust…

Matthew Jarvis:   Hello everyone. Welcome to another episode of The Perfect RIA podcast. I am your co-host, Matthew Jarvis, calling in live or recorded from Cabo, Mexico. As you longtime listeners will know, Micah is often joining the podcast from exotic location, so it is my turn to be calling in from an exotic location. Micah, where are you today?

Micah Shilanski:  As I’m hearing that, I’m like, is that what I sound like when I’m doing this? Because it sounds better in my mind.

Matthew Jarvis:   You always have more tact and style than me. Yeah.

Micah Shilanski:  No, it’s great. He’s in Cabo or he’s on a deck with a giant light behind him outside in Seattle. I don’t know. It’s like 50/50 at this time.

Matthew Jarvis:   It could be anything. Well, Micah, as always, despite location, I’m really excited to do a podcast episode together, especially on this topic, because this is actually a question that came from your own office.

Micah Shilanski:  It did. It did. It was great. One of the things is, so we brought on our new advisor here, he’s doing wonderful, just growing. And one of the things is, as he’s going and learning our style of financial planning, I’m trying to put time parameters around things. How long should things take? And so I said, when you’re doing this, it should take X amount of time, it should take Y amount of time, because it’s easy for us to get into playing office and guilty just like anybody else. So how do we constrain that? So we’re coming up on a tax planning scenario with a client and I said, “Hey, it shouldn’t take you any longer than 10 minutes to wrap this up.” And he pushed back later and says, “Look, I know you said it’s 10 minutes, there’s no way this takes 10 minutes to do.”

                           And I was like, “Okay, all right, well then this is perfect. Let’s find out.” Maybe I’m just bolstering, maybe in my mind it goes faster, I’m not tracking my time, so let’s figure it out. So I jumped on a Zoom call, I clicked the record button and I went through everything in nine minutes and 47 seconds. Now, I was going fast, just to be 100% clear, because I wanted to make sure I did this. We even found about an $80,000 error in the client’s tax return, because we had just got the return in from the client. So we were a little fine on air, we were able to add some massive value in tax planning in less than 10 minutes. Now, a couple of caveats with that, I knew the clients.

Matthew Jarvis:   Sure.

Micah Shilanski:  This wasn’t a prospect why I had no idea. So once I have a baseline of the client’s basic information, age, income, general parameters, you can fly through DMV, delivering massive value through that tax return.

Matthew Jarvis:   I want to pull out two things, Micah, that you just touched on. One, for anyone listening, who says that’s absolutely ridiculous. It takes me hours to do a tax plan. It cannot be done in 10 minutes. I would invite you to step back and just say, what if it was possible? This is something that Micah and I, as a mantra, we use all the time, what if it worked? So just start from that framework. All right, if I only had, gun to my head, 10 minutes to do a tax plan, what would I have to change to make that a reality? So listen to the rest of this podcast from that framework.

                           The other is setting time expectations for your team. In our minds, we have an idea, this should take a certain amount of time. And because we haven’t communicated that to the team, they don’t know how long that might be. You might I think an hour in your mind, they might think five weeks. And so it’s a good tool when you’re giving your team an assignment to say, “Hey, once you’ve spent two hours on this, come back to me. Once you’ve spent a week on this, come back to me.” So that it doesn’t become this endless project on something you could solve in this case, less than 10 minutes.

Micah Shilanski:  And true on this, this isn’t as an egotistical comment as it’s about the sound, I always try to give a three to four X on what I think my time is going to be on something versus my team’s time. And so if I see or think something’s going to be in 10 minutes, when I’m giving an expectation, it needs to be 30 to 40 minutes for a non advisor to be able to pick something up and run with it, just because we’re looking at things differently.

Matthew Jarvis:   That’s right. And this is a good point on delegation, not the topic of our podcast, but oftentimes we get stuck saying, “Hey, it’s faster if I do it myself.” Now, there’s all sorts of reasons that that’s wrong long-term. But even in the moment, I can say, boy, it’ll take me 10 minutes to do this tax plan, it will take my assistant advisor an hour. Perfect. But my 10 minutes is more valuable than his hour.

Micah Shilanski:  Exactly. Exactly. So really important takeaways in here. Now, before we get into some housekeeping items, if you are a first time listener, because we are growing. So thank you guys for sharing this podcast, it’s amazing, over 20,000 downloads a month because of you, our listeners. So thank you. If you are a first time listener, email, [email protected] and we have a little, how to series, how to get the most value out of these podcasts. It’s about five or six different emails you’re going to get to make sure you know the terminology and the best use. So send that email over. Now, Jarvis, besides that housekeeping side, let’s transition this. First question, why is tax planning even important? It has nothing to do with investments. So why do we even do tax planning?

Matthew Jarvis:   Yeah. It is a critical thing that’s overlooked by so many advisors. And it’s important for a lot of reasons. We could just look at it from the dollars and cents. The client overpaying the IRS does not make them more patriotic. But I really want to look at this from is from a behavioral angle. The behavioral traction you get, or the behavioral prowess you get from saving a client money on taxes is disproportionate to the dollar amount. So if I can save a client $1000 in taxes, one, it’s very quantifiable, but that’s worth 10,000, $100,000 of investment gains. Because the investment gains we can say, well, I might’ve made that anyway, that’s just the market or the markets go down. Tax planning has a huge impact on the client’s behavioral, which ultimately leads to the amount of trust they have in your advice.

Micah Shilanski:  Absolutely. The reason that I got into tax planning before I even knew that is because people weren’t doing it. And so we’ll often look at business, especially in our areas and say, great. If I’m trying to come out as an expert, I’m trying to be really great in what do I do, what areas can I focus on that other people aren’t as unique identifier, as unique value add? And even still today, tons of people do not handle taxes or do taxes really well. So it’s still a great area to become an expert in. And by the way, when we say expert, we don’t mean getting the LLM. A master’s in taxation is not what we’re talking about here. What we’re talking about is for your niche, knowing how to read, understand and apply the tax laws to reduce your client’s tax planning. And, darn, your every situation, you can provide options that they can reduce their taxes over time.

Matthew Jarvis:   Yeah. I would add another reason there. This is a selfish one. Micah, as you pointed out, very few tax repairs are providing proactive tax advice.

Micah Shilanski:  Oh, yeah.

Matthew Jarvis:   Almost no financial advisors, investment advisors, brokers, et cetera, are doing that. Even the biggest firms, when I come head to head with them, I know that the very first thing I can do is ask the prospect, “Hey, what did X, Y, Z firm say when they looked at your tax return?” “Matthew, they never looked at my tax return.”

Micah Shilanski:  Interesting.

Matthew Jarvis:   “Really? How would they tell you how much to withhold from your IRA distributions.” “Matthew, I don’t know.” “How would they advise you on how big of a Roth conversion to do?” “Matthew, they said nothing about Roth accounts.” “Oh, okay. Well, in our office, that’s really important stuff. Because for most of our retired clients, the IRS is probably their single biggest bill after maybe their house. But again, like you, most people have their house paid off.” And I go into this whole thing on how important tax planning is. So it’s a big differentiator as well.

Micah Shilanski:  You know another big part is? The IRS lets us do this every year. So this isn’t a one-time show. This is not like a state planning. And yeah, you revisit state planning, but I mean, come on, you get the most value out of state planning the initial time a client does it when they haven’t done it before and it’s tweaks after that. Well, guess what? With tax planning and IRS code change, we get to consistently deliver massive value to clients on a routine basis. It’s beautiful.

Matthew Jarvis:   It really is. Now, this should not be confused with doing tax prep.

Micah Shilanski:  Yes.

Matthew Jarvis:   That’s a pure commodity play, there’s really not an angle there, other than in some really obscure situations. And this also has to be done in accordance with the rules and laws and your compliance department. So almost every compliance department is going to say, hey, you’re not licensed to provide tax advice, which isn’t necessarily a real thing. You don’t have to be licensed for a tax advice. That’s a different story. And-

Micah Shilanski:  Or is this if be you’re uniquely trained to give tax advice because there’s a whole module on taxes, but whatever, whatever let’s move on.

Matthew Jarvis:   Yeah. So you may have to work with your compliance department and say, if I want to advise a client on how much they convert to Roth IRA, how do I word that? So we’re going to set all that aside. That’ll be another podcast on leaving your broker dealer. Oh, that was a podcast we did earlier this year.

Micah Shilanski:  All right. So as we get into this and we are going to dive into some things on how to look at tax returns and how to go through things. But one of the things to really focus on is Parkinson’s law.

Matthew Jarvis:   Yes.

Micah Shilanski:  And we talk about this all the time. Things will take as long as you allow them to take, so what’s your forcing mechanism to push the envelope. Now, you’re never going to be 100%. I don’t care how much time you spend. You’re never going to be 100% with everything. My question is where do I deliver the most value? Is it going from 99.5% to 100%? Or is it just cramming through and getting to 99% really, really quickly. And I think it’s the latter and that’s where we’re going to focus our Parkinson’s law, is focusing on finite periods of time, where we’re the most creative, we’re in the zone to deliver the most value for clients.

Matthew Jarvis:   Let me give you an example of that. Let’s say again, my niche is retirees. So let’s say we’ve got a client retired in their mid 60s and we fast forward and say, “Hey, when you get to be 72, you’re going to have RMDs of…” Now again, I could spend an hour doing a time value of money calculation, this whole thing and so I just say, “Hey, your RMD is going to be about 30,000. Let’s start doing Roth conversions of about 20,000 right now, every year, leading up to your required distribution.” That’s a value add that I don’t need to spend an hour doing Monte Carlo illustrations on what their account value might be at age 72, because we don’t know. And so instead I can spend 10 minutes to do a Roth plan. I don’t need an hour for that, but Parkinson’s law would allow me to spend an unlimited amount of time there.

Micah Shilanski:  And I want to focus on that.

Matthew Jarvis:   Great.

Micah Shilanski:  You could get to the nth degree of saying, well, how do you know exactly how much to convert? Well, I could tell you that if you could tell me exactly what the tax law is going to be in 20 years. Okay.

Matthew Jarvis:   Yes.

Micah Shilanski:  Since none of us know that it’s going to be in the next decade, much less the next 20 years, these are guesses. And what we’re going for with the client is, Hey, if we had a pot of tax-free money in the future and you had a big expense, would that be advantageous? The answer is yes. Perfect. How do we do it now with lower taxes? Again, to your point, we don’t need to spend 16 hours on this.

Matthew Jarvis:   Totally. And Micah, as you highlighted earlier, tax planning becomes much easier when you have a niche, because you can look inside that niche. And I can ask myself the same couple of questions for every client, which really boils down to three questions, are they in an unusually high-income year? In which case we want to pull down their income. Are they in an unusually low income year? In which case we want to push it up. And then the third one is just, are there just missed tax opportunities, deductions they’re not taking. Maybe they should be using a QCD instead of writing checks to charity, things like that. But everything really boils down to those three categories, if you will.

Micah Shilanski:  Absolutely. So Jarvis, do want to make a transition right here and let’s actually talk about the tax return itself.

Matthew Jarvis:   Yeah.

Micah Shilanski:  And unfortunately, this is going to have to be quick. This is our forced mechanism. We’re going to fly through some of these things. That’ll be there and we’ve done other big webinars on this, but let’s go through the tax return. Then let’s go through some systems that we have in our office to help DMV with clients all the time. That sound good?

Matthew Jarvis:   Yeah. Well, let’s start that off with, you have to have all your client’s tax returns.

Micah Shilanski:  You stole my action item.

Matthew Jarvis:   This will come up later in the podcast as well. You obviously have to have… This as a non-negotiable. In fact, like you were just mentioning before this call that you graduated a client who would not sign the form 8821, allowing you to get transcripts directly from the IRS.

Micah Shilanski:  That’s very true. So we went through this last several years. I think it’s been three years ago or so give or take, that we’ve got 8821s of my clients so we can get copies of IRS communication, which is really nice and electronically copies of clients transcripts with the IRS, which is beautiful. And we had one client bring it to their CPA. And unfortunately the CPA was kind of sandbagging us and said, this was horrible. Actually he sent me a fax saying this was unethical for me to even ask for this information. I don’t know what’s unethical to ask about tax information that was there. So had a lovely chat with the client and just said, “Look, it’s a deal breaker for me. This is how important tax planning is. I totally understand if this isn’t going to work for you, we’re going to have to separate. We’re going to help you find another advisor.” And that’s what we’ve done.

Matthew Jarvis:   Yep. I’ve done the same for prospects on a regular basis. “Hey Matthew, I have a tax repair. I don’t know why you need to see my tax return,” and I’ll explain, “Hey, the IRS is probably your biggest bill in retirement. We need to make sure these things are coordinated, but like not letting your doctor take your pulse, this is a non-negotiable for me.”

Micah Shilanski:  Yeah.

Matthew Jarvis:   And I can’t think of a time when that hasn’t worked. I definitely have had some people push a little harder. They say, “Hey, my tax return is 300 pages long.” Perfect. Bring it in, the office will scan it in for you in 10 minutes. Not a big deal.

Micah Shilanski:  Yeah. Never had an issue with that one.

Matthew Jarvis:   Yeah.

Micah Shilanski:  All right. So let’s go through the tax return. Of course, number one is getting them. Number two, getting used to reading them is really, really important as you’re starting to look through these things. So knowing your client is really good. Again, talking about that niche concept, what are things that you should be looking at? So the first thing when I look at a tax return, I’m going to want to know the client’s ages. I’m going to want to know approximately their income sources are. Are they retired? Are they still working? Do they save, do they not? Just give me some general idea. And then I’m just going to go down every single line on that 1040 or the additional worksheets that are now the extra four pages. I’m going to go down those lines and say, what are these numbers to number one, just get familiar with where their tax income is coming from.

Matthew Jarvis:   Correct. And I had once earlier in my career, written out myself an entire tax guide, which I would give to everybody, but it’s dated, someday I’ll revamp that. But I had written next to a tax return questions I should be asking myself about each line. Micah you mentioned similar ones. Are their names correct? Are their addresses correct?

Micah Shilanski:  Yeah.

Matthew Jarvis:   Is their social security number correct? I had a client just come in, a prospect and we just landed and it showed that he had a $50,000 IRA distribution. I’m thinking, wait a second. He’s under 59 and a half. This has a lot of implications. I need to start asking questions about this. So to your point, every line, even lines that are blank, there’s a message there. There’s a lesson that can be learned. And you just need to be able to read that sort of language you almost need to build to speak.

Micah Shilanski:  We just got an IRS notice from a client. It was an IRS intent to levy their accounts. So a little bit more serious. The IRS are getting serious about some money that was owed. And as we went back through and looked at it, the social security number was wrong. And it was an interesting find, because on the tax return, the social security number was correct because the IRS, when we got a copy of the return, the repairer had fixed it, when they had filed the return, it was incorrect. And so-

Matthew Jarvis:   Interesting.

Micah Shilanski:  Yeah. So one of those little things that we wouldn’t have caught on the first glance, because when we look at the 1040 the socials’ correct, later on we’re discovering this things one digit off on the social created an IRS levy letter. So these are really important things to watch out for. And that’s a great story as to why. Hey, they’re talking to an advisor and they had one of their clients that their account was going to be levied by the IRS because the social is wrong. So we want to confirm your information is right.

Matthew Jarvis:   Yes. And I want to highlight that Micah, so sometimes especially for younger advisors, you say, “Well, I don’t have those stories?” Well, you will eventually, but you’re totally fine saying, “Hey, I know an advisor who mentors me had this side or the other.” For example, we had a client, they retired, rolled over their 401(k) account. This was several years ago, it was about $500,000. The 401(k) provider reported incorrectly to the IRS. They reported it as a taxable distribution. The tax repair said nothing about that, so the client paid all the taxes on their rollover and it took almost a year before we finally got the tax return from the tax repair and I’m looking through it and I see this $500,000 taxable distribution. And so we ended up saving the client hundreds of thousands of dollars because the 401(k) custodian had reported it incorrectly to the IRS. And that’s again, an example that I give to prospects or clients that push back. I say, “Boy, Mr. And Mrs. Prospect, we saved a client several hundred thousand dollars on an error that we caught. This is why we ask for tax returns.”

Micah Shilanski:  Absolutely. All right. So after I get familiar with the tax return and I kind of know where it is, then I want to go back through and say what’s missing or what’s wrong. Some things that come off really fast, 8606-

Matthew Jarvis:   Yes.

Micah Shilanski:  … Those are nondeductible, IRA contributions, if you’re not familiar with that terminology, those get missed all the time.

Matthew Jarvis:   Yes.

Micah Shilanski:  The contributions get missed. The forms get missed. They can be filed separately. They don’t have to be with the return. I mean, there’s all these little nuances with this form that I like to look for. Schedule Es, rental properties get screwed up all the time. There’s generally a lot of hidden deductions. Again, Jarvis, to your point, those three areas. What are things that are just not taking advantage of, schedule Es, rental properties, schedule C’s is going to be another big one as well, self-employed income is there. Itemized section it’s pretty much gone away, so if there’s a big number in there, again, back to the comment about can they do a QCD? What’s their age? That could be a question, but those have really diminished. So those are the three big areas that I’m going to look at for mistakes in my niche.

Matthew Jarvis:   Another really seemingly simple things but as all planning doesn’t have to be this exotic stuff, sometimes we’re looking for some exotic strategy. It can be the simplest thing. So when I’m reviewing a tax return with a client or a prospect, I’m flipping it over to the second page and looking to see if they got a refund or if they owed money. And I simply say, “Mr and Mrs prospect, I see that you got…” And I’m looking at a return right now, “I see you got a refund of $4,800. Is that pretty normal for you?” And then they’ll say, well, it is, or it isn’t. And then what I’m looking for is asking if they like getting refunds or if they prefer owing. If you’re strictly doing the math, everybody would want to owe, that way time value of money, blah, blah, blah, blah, blah. Not really a thing in zero interest rate environment.

Micah Shilanski:  At 0.05% of bank rate? It’s money.

Matthew Jarvis:   But if the client tells me, “Hey, I need to get at least 5,000 back every April because I use that to pay my property taxes.” Good. Now I know to make sure to over withhold on everything. So the smallest thing can be a big difference to the clients.

Micah Shilanski:  Now, you could go through and look at this aspect and say, look, if a client owes 20,000… Total tax liability is $20,000, does it really matter if they paid in 15, they owe five at the end of the year? Yes. Yes it does. It matters a lot to the client because a client never looks at the return. At least, there’s very few that I can count them on one hand, that could look at a tax return and say, “Hey, my tax liability last year was $23,000.” Most of them are going to say, “Hey, I got $3,000 back on my taxes.

Matthew Jarvis:   Yes.

Micah Shilanski:  Now, we know those are two totally different things, but that’s not what the client’s looking at. Again, solving for delivering value to the client is also their preferences.

Matthew Jarvis:   Another important tool and it’s all about how you communicate this to clients. Another important tool I always use or script, I explain to clients that by and large, the IRS is looking at one calendar year. Now, again, for those tech savvy people who listen to podcasts. You know, that’s not entirely true. We have long-term, short-term losses. We have carryforward losses, blah, blah, blah. For the client’s sake, the IRS primary looks at one calendar year. Where we can get an advantage over the IRS is when we look at two years, three years, 10 years, your entire lifetime, multiple generations. When we plan that way, we can significantly reduce the amount of money you pay the IRS. Is that okay with you? So just that verbiage alone is very powerful.

Micah Shilanski:  Yeah. Huge. Really, really powerful to look at that. Then we can bring up the conversations like we were talking about before, like Roth conversions. How do those figure in, because now we’re talking about a 20 year time horizon. Another thing to look at too is social security income. We always talk about that. One of the things, if I’m bringing on a prospect and they have social security turn on, depending on their age or when they turn it on, I might ask to talk to them about paying it back. Does it make sense? Have they looked at it? No, they can’t go back from inceptions. We can still go back a year. So how do those things work in there?

                           This goes to the dishwasher rule. If it’s a prospect, I want to make sure they had these conversations with their other advisors even if they may or may not 100% apply. Why? Because it shows that I’m looking at them. If I look at them and I don’t communicate with the client or the prospect, they don’t know we looked at it. They don’t know we’re doing our work. We have to show them that we’re doing our work.

Matthew Jarvis:   Again. These don’t have to be complicated strategies when it comes to the dishwasher rule. For example, if the client’s already taking social security, I could have on my prospect checklist review the amount of taxes you’re having withheld from your social security.

Micah Shilanski:  Yeah.

Matthew Jarvis:   So back to our earlier example, they say, I always like getting a refund. Perfect. Let’s increase the tax withholding on your social security or alternatively, they’re always getting refunds and they don’t like it. Perfect. Let’s decrease that. And you might think, wow, that’s not a value add. That’s not changing dollars and cents, but it is a value add because you’re the first person who’s ever articulated that.

Micah Shilanski:  Absolutely. We have a client is really well off, doing really good. He hates paying taxes. He goes, “Look Micah, I know I owe taxes. I understand how this math works. I cannot stand it when I owe taxes the end of the year.” Not a problem. We make quarterly… And he doesn’t like writing the checks either.

Matthew Jarvis:   Yes.

Micah Shilanski:  He says, “I don’t want to write, I don’t like writing the checks. I don’t like sending the money.” He’s like, “I know I need to pay, but I do not want to deal with that.” Perfect. We’re going to have quarterly payments withheld from your account. We’re going to do an estimate in November, December. We’re going to overpay the IRS. He gets a four or $5,000 refund every year. He is tickled pink and he has multi-million dollars in his investment accounts and he wants a $3,000 refund. Great. We can help with that.

Matthew Jarvis:   I don’t want us to go past this one. Estimated payments drive tons of people crazy. So if they’re clients that are taking regular IRA distributions, perfect. Just use that instead of estimated payments increase the withholding. Or Micah, to your example, if they’re not taking IRA distributions, perfect. Have the custodian cut a check to the IRS so that they don’t have to do it. Quick five star tip here, each of your estimated payments should be a different dollar amount. So I know your CPA will tell you send in $10,000 a quarter, terrible idea, send $10,001 the first quarter, 10,002, the second, 10,003, why? Because the IRS loses checks and we want to know which check got lost so that we can document that. That again is the smallest thing that in a Monte Carlo illustration makes no difference to the client and you’re the smartest person they’ve ever met.

Micah Shilanski:  Yeah. Self-employed clients.

Matthew Jarvis:   Mm-hmm (affirmative).

Micah Shilanski:  That say, how do we do this? We like the bucket strategy. This is the reason the buckets work out so well is with taxes. So when they get paid, we carve out 30% of their income right off the top. It goes into a tax bucket, that’s outside. It’s generally at Schwab because that’s our custodian. So we can see the money that’s inside of there. And then again, to Jarvis’s point, what are we doing with the custodian? Well, the custodian send out the checks when we’re doing our quarterly tax meeting. We’re quasi-automating it for the client. Automating on their end, where they don’t do anything. On our end we have to look at it, but this is a massive value add because with self-employed clients, what happens in December? In December, generally, right before Christmas, their CPA calls them and says, “Merry Christmas, you made a lot of money this year and you owe X amount, 50, $60,000 in taxes.” Because the CPA is not looking at their returns. Correction they’re looking at data preparation for last year.

Matthew Jarvis:   Yeah.

Micah Shilanski:  They’re not looking at current year stuff and clients hate getting that call. That’s an easy, easy one to fix if you’re meeting with your clients and you’re looking at their income, tax projections are pretty simple.

Matthew Jarvis:   This is where communication is key and having this, so Micah can go to these small business owner clients and say, “Mr and Mrs. Client, I work with a lot of small business owners. I am a small business owner myself. And I see again and again, small business owners who get called in December by their CPA and they owe a ton of taxes. Has that ever happened to you?” “Yeah, it has. I really hate it.” “Perfect. We have a system for addressing that.” And now Micah is the hero, whereas the CPA has been the villain. And by the way, villains always look for co villains. So when they get the call in December and they say, “Well, how do I hold all this money?” “Well, Micah didn’t tell us about these capital gains,” which may or may not be true.

Micah Shilanski:  The $1000 gains. Totally yeah.

Matthew Jarvis:   Yeah. You had to know after a year. You’ve been thrown into them, we all have.

Micah Shilanski:  Oh, dozens of times.

Matthew Jarvis:   Yeah.

Micah Shilanski:  We had a client doing a 401(k) contribution for years and for whatever reason, the CPA missed it and didn’t add it inside of their payroll then called me out and says, “Well, Micah never told me about this.” We’ve been doing these consistently for four years. Here’s the email that everything was outlined in. And the response was, we didn’t tell them. Okay. My fault. I should have been more proactive to the CPA. I should’ve been looking at more things. I’m not going to blame the CPA, even though it’s their fault, they prepare the documents. We need to give leadership on-

Matthew Jarvis:   Their signature, yeah.

Micah Shilanski:  Yeah, minor things. So this is totally going to happen. How do you get in front of it? And that’s with clear tax communication with the client.

Matthew Jarvis:   Yeah. Now, there are several more things that we can tackle here. One being of course, working with centers of influence CPAs, tax repairers. How do you keep them on your side versus becoming an enemy, especially when you’re pointing out tax strategies that they’re neglecting to mention. It’s very easy for them to become adversarial. There’s a whole conversation we can and have had on that. Micah, how about other things you’ve run into doing tax planning either with the tax repair or just in general?

Micah Shilanski:  The biggest thing is the communication with the clients. Stay out of tax language. That’s what CPAs do, clients don’t understand that. Even well-educated, extremely smart. Clients are extremely a lot smarter than I am, right?

Matthew Jarvis:   Yeah.

Micah Shilanski:  They do not understand the tax language. I want to speak to them in plain dollars. And you may think this is over simplifying the tax system. It’s just that what you said. IRS looks at things one year at a time, I use that same language.

Matthew Jarvis:   Yeah.

Micah Shilanski:  Yep. There’s exceptions to those rules. There’s exceptions to just about every tax rule. But we’re going to look at it one year at a time. You need to pay the IRS. And when we talk about paying the IRS. I’m never talking about the total tax liability. I’m talking about, a refund or none at the end of the year. So again, talk about it in your client’s language, how did they communicate with these things? However, I’m going to pivot that with a COI, and with a COI I’m absolutely going to be dropping code.

Matthew Jarvis:   Totally.

Micah Shilanski:  I’m going to be talking about the IRC, Internal Revenue Code. I’m going to be talking about code sections. I’m going to talk about form numbers, 8606 money. Do you have any of this? What about 8821s. We’re going to be talking about those things because it gives me more credits with that COI.

Matthew Jarvis:   Totally. And not to sidebar on this too much, but this is a common mistake advisors make is they use jargon, they use terminology the client doesn’t understand, unnecessary complexity and it confuses them. And this is where you can learn from everywhere else you go in life, whether it’s your doctor, or even when you go to Starbucks and they say, “How do you want your drink?” I know Micah always likes his extra hot. They don’t say, “Well, is that 211.7 degrees? Because that’s our normal temperature.” Keep it simple. When you go to your doctor and he says, “Hey, your blood pressure is this,” “Perfect doc, what does that mean to me?” “Means you need to cut back on the hamburgers.” Perfect. That’s advice I can take.

Micah Shilanski:  So what are these areas with clients that you want to do? Jarvis, we can keep going on, on this, but looking at the time you want to transition to some action items?

Matthew Jarvis:   Yeah. Let’s transition to some action items. I’ll go ahead and steal yours again. Action item number one… By the way, for those of you listening to the podcast, in case you’re ever worried that Micah and I are just given each other hell, this is what we absolutely love to do.

Micah Shilanski:  We are.

Matthew Jarvis:   Yeah, we are. We are and it’s just purely out of joy. So action number one, get all of your client and prospect tax returns. This is a non-negotiable every single year you need the tax returns. It’s just essential to planning. We can get on this whole fiduciary bandwagon, which is used to cover everything. Or if you’re not providing tax planning and you’re missing a whole component of the tax planning process, really, it just makes you a better advisor, so do it.

Micah Shilanski:  Absolutely. The next one is, whose tax advice can you learn from? This is a really, really good question.

Matthew Jarvis:   Yeah.

Micah Shilanski:  If you are not familiar with taxes now, I haven’t gone through this. I’ve heard it’s good. Kitces came out with Jeff Levine and they have a tax program. So if you want a more in-depth review on understanding taxes, that could be something to look at. If you want to know how to effectively communicate that with your clients, that’s what backstage pass does. Total selfish plot. We did a webinar just on what? February 10th.

Matthew Jarvis:   Yep. Close to February 10.

Micah Shilanski:  I think inside there. We did for the nation that’s just talking about taxes, how to review a return, how to communicate it with your client. And there’s two components to that. There’s understanding it. There’s communicating it with your client, which is really, really important. So understand who you’re getting advice from and how it applies to a client.

Matthew Jarvis:   I would say on that note, the best education I ever got on tax planning was from Tom Gal who took time to walk through a client’s tax return, a prospect’s tax return with me live in person. And it blew my mind because his ability to articulate it. And I learned more from him on that 20 minute call than I had in hours and hours and hours and hours of tax classes. Now those tax classes are still valuable, but you’ve got to find somebody who knows how to articulate this to clients and prospects.

Micah Shilanski:  The other one I’ll throw out there for you, we talked about these 8821’s. These are a phenomenal way, we use a system called Tax Help Software or in order to get the client’s data directly from the IRS. It is not as easy as it sounds to get this. It’s not as simple signing the form and sending it off. There’s a few steps that you have to jump through, but it’s worth it, in my opinion. It kind of hands down. It has been a great, consistent value add for clients.

Matthew Jarvis:   Yeah. And if that’s something you’re interested in, shoot us an email to [email protected] and let us know. We’re considering the logistics of rolling out an 8821 program for all of our backstage pass members. So they’ll have access to that, still working through the logistics so no promises on that, but the more demand we have, the more we can pass onto our developer, tell them to get on that. So send that, [email protected]

Micah Shilanski:  Awesome. Well, tons great advice. And of course, this is all about taking action. Take this information, move forward, move into your iTunes app and give us a five star review. Help this podcast grow, share it with your friends because that is how this nation is growing more and more. And until next time, happy planning.

Matthew Jarvis:   Happy planning.


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