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Advice from a CPA Client - How to Break the News That They Owe

Tax billLet’s just get this out of the way up front: I’m not a CPA. I’m a pictures-and-words kind of guy. Numbers never loved me. They were my bully in school. To this day, the sight of long columns of numbers causes me all manner of gastric discomfort. So when I started my own business and realized there would be bookkeeping involved, naturally I addressed the challenge by running to my CPA.

Now, I have to pause here a moment to say my CPA is the most patient guy in the world. A sample of things he said to me over the years:

“No, Adam, you can’t deduct Warcraft.”

“What do you mean you LOST the checkbook? Don’t you use Quicken? Wait—you DON’T TRACK EXPENSES???”

“No, a 1099. Not a W2. No, that’s a K1—no, not a K9, a K1. Look, just hand me the box of papers and I’ll figure it out. Go home.”

And so on. Suffice it to say, I’ve given the poor guy a workout over the years, but he always comes back for more with a smile. The thing is, even though I’m exaggerating a bit (surprisingly less than you might suppose), what I’m describing is how LOTS of people feel when dealing with their CPA: kind of clueless. When you don’t work with numbers for a living, it’s hard enough to comprehend the million things a CPA does to prepare a return. On top of that is the litany of codes, laws, regulations and best practices we see in that encyclopedic behemoth you keep on the heavily-reinforced shelves behind your desk. It is, to put it mildly, intimidating.

And then suddenly, there we are on January 2 to sign our returns.

Kidding.

There we are, on April 14 at 4:57 pm, to sign our returns, anticipating the giant refund you told us it’s better not to have, only to find we (gulp!) OWE money.

How did this happen? But I had expenses! There were mitigating circumstances! Supplies! Business dinners! I gave you a WHOLE SHOEBOX of mostly legible, spaghetti-stained receipts! I CAN’T OWE ANYTHING!!!

You’ve probably heard the breathless protestations of a million unhappy clients. “Isn’t your job to save me money??” Clients don’t always understand that you’ve saved them money even when they owe the IRS. But CPAs can’t always anticipate a client’s reaction to the stress of an unexpected tax bill, either. Of course, the best way to address misunderstandings is to prevent them by discussing the return before starting it. But you can’t always do that. So what’s the best way to break the news that a client owes the IRS this year?

  • Be proactive. Encouraging your clients to plan for their taxes needn’t be complicated. While most clients don’t need extensive tax planning, many would benefit from semi-annual or even quarterly phone conferences with you to check in. Maybe business is better than usual this year. Maybe the client bought a car to use for deliveries or to get to meetings. The sooner they make you aware, the easier it is to prepare them for the tax implications of their actions and help them to adjust their expectations and actions. Asking a client to scramble—whether it’s their fault or not—for a months-old receipt they didn’t think they needed is a sure way to breed displeasure. Like you, they are facing deadlines. It’s easy for them to get frustrated.
  • Be understanding. If your client didn’t mention that they thought they’d owe something this year, it’s a safe bet that they expect to owe nothing. Before handing them their return, take a moment to review the steps you took to minimize their exposure. Phrases like, “This would have been much worse if I hadn’t…,” or “a new IRS regulation means I can’t save you money here” go a long way to showing you thought the return through and did the best job you could. Commiserate with them if the news is especially bad. “I know this looks pretty bad. Let’s work together more closely this year so this doesn’t happen again.”
  • Be instructive. Have a clear idea of what the client could have or should have done differently in order to avoid a bill at the end of the year. Share that with them. Assure them that taking careful steps, along with taking advantage of your expertise, can help to reduce the possibility of owing money next year.
  • Be patient. By the end of tax season, your brain is completely fried. It’s tempting to rush your clients along so you can watch the pile get a little shorter, but to them, your pile consists solely of them. They’ll have questions. Maybe even complaints. Take a deep breath, listen carefully, and explain fully.

Not every client who owes the IRS or the state will walk away from your office feeling good about it, but there’s no reason you should take the blame. If they don’t have a thorough explanation for the bill, however, take the blame you most certainly will. By combining forethought and actively managing your client relationships, you can be sure they’ll be back to see you next year.

Adam Junkroski, Lead Manager-Tax Communications, American Institute of CPAs. 

Tax bill surprise courtesy of Shutterstock.

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