Written by Jason Pueschel Alternative Tax Management, LLC
As we roll towards another December 31st , with Thanksgiving behind us, stockings hung on the chimney with care, menorah’s about to light and shopping for gifts in full swing, those of us that provide financial and tax advise are leery of our seasons grinch – the panicked last minute tax client.
Don’t get me wrong, we love the September to December tax strategy rush, as this is where we drive a lot of our annual revenue, but does it have to be this way? Can we discipline our clients to begin strategy planning throughout the year? The answer is yes.
There will always be that last-minute client or introduction of someone who has a year-end bonus, stock option, sale of a company, stock or other asset, but do those really just pop-up last minutes? These are all items that we can be aware of and plan for early in the year, but why don’t we? One reason is because our low hanging fruit is that client who is in damage control mode and on the clock to fix it or pay significant tax consequences. These folks are introduced to us in dire need of help and on a timeline. Their deadlines become ours and they move to the front of the line, pushing existing clients that are willing to pay ongoing fees for planning and advice out of their way.
Now, I am not saying don’t work with these individuals as sometimes a quick adrenaline surge and short notice can be lucrative and exciting. Just don’t build your practice around it and those clients that expect this each and every year need to be “disengaged”.
Let’s discuss some ways to stabilize that year end blitz.
Q1 – Its tax filing time! Yes, the battle to gatherW2s, K1s, 1099s, and rush to file or extend that 1040 takes top priority, but let’s use this IRS mandated time in front of clients to our advantage.
Provide a list of previous year K1s, 1099s and other investment forms that they may need to track down. Highlight the amount of benefits reported on those forms and how they convert to bottom line tax savings.
• Oil and Gas – Intangible drilling cost deductions reduce gross income, talk about the cash savings.
• Solar Development – Accelerated depreciation deductions reduce gross income and tax credits pay the tax owed. Show them how this works. Typically, big multiples of tax savings.
• Qualified Opportunity Zone Fund (QOZ Fund) – Deferral of capital gains until 12/31/2026 and for some programs a reduced amount reported when it resurfaces. Get them to prolong current capital gains until the new version comes out in 2027.
• Discount Roth Conversions – Review the 1099R and discuss what the initial investment amount was and how they are paying significantly less tax based on a reduced valuation.
• 1031/DSTs – Highlight taxes they would have paid on capital gains, depreciation recapture, net investment income tax and state tax.
• Charitable Contribution Deductions – Show them how being philanthropic has saved them taxes.
We work so hard to deploy these strategies throughout the year, but then because of the lack of time and rush of Q1, the fruits of our labor are not fully appreciated. Make sure you use this time of year to illustrate why they pay you. It is not for tax filing; it is for tax reduction!
Q2 & 3 – This is the time to rejuvenate and relax right? Wrong, this is where you get a leg up on the competition. It is this stretch of calendar that can make or break your year. Now is when you can push your business to the next level or decide to just settle back in to chasing panicked clients. Don’t do that! Get in client strategy mode.
Typical client “why would I want to invest in the program now as there is no current cash flow, and I will get the same deduction as an investor that comes in December 23rd
.” True – but these sponsors have gotten smart with meaningful early incentives such as higher preferred returns, interest on your money, bonus on investment and more. If it is a repeat client, you should have already highlighted their tax savings from last year and got them primed, ready to go.
Talk about long-term tax efficiency and strategies such as discounted Roth conversions and QOZ Funds. Show you are forward thinking by positioning 2026 capital gains to not be triggered until the new 2027 Funds are rolled out (5-year tax deferral, step up in cost basis, tax free growth). Do any programs need material participation? Start in the summer, not end of Q4.
This is the time of year you earn that retainer fee! Reach out to your tax mitigation program expert (selfish plug) and see what is new for the year and learn how they can help you become more valuable to clients.
Q4 – The party is back in full swing. Keep your head down and the new subscriptions coming. Remember, you already planned with ongoing clients, so they are all set. Q4 is for new introductions and yes, that panicked client. Don’t forget to highlight how you saved them from their tax nightmare when you reconnect in Q1. They should be loyal forever. Get that retainer in place!
We are in this together. Our adversary is taxes and our client opportunities are endless.
Everyone wants to reduce that check in April. Pay your fair share, but not a penny more!
