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Your Client’s Tax Return is a Gold Mine for Planning Opportunities


Gold mineNow that we’re past the April tax filing deadline, looking ahead to helping clients survive the upcoming 2016 tax year may very well be the last thing on your mind. Nonetheless, proactive CPA financial planners and tax professionals know that Form 1040 is a virtual gold mine with many nuggets of information to offer. The individual income tax return will not only yield opportunities to lower your clients’ tax liability and help them plan for their retirement, but is also beneficial for your practice.

You can expand your scope of services by adopting a more holistic financial planning approach. Portfolio managers, estate attorneys and insurance professionals focus on their specialized fields. However, a client’s CPA is likely the only professional on the team who is going to take the time to analyze the 1040.  This is nothing short of “having the window into everything going on in a client’s life”. For the practicing CPA financial adviser, it provides a natural springboard into deeper client conversations and provides opportunities to discuss new service offerings.

Here are a few places to start digging:  

Deferral Opportunities

Finding ways to leverage assets is a key component of any retirement plan. Identify deferral opportunities by looking at all income sources on the 1040. Four recommended steps to take include:

  1. Discussing the benefits of saving through various plans, including 401(k), 457, 403(b), a Simplified Employee Pension (SEP) or an IRA (including a Roth).
  2. Reviewing the benefits of maximizing contributions and deferrals, as well as the tax‐deferred time value of money.
  3. Considering exercising stock options on an annual basis and going over the benefits of 83(b) elections, if applicable.
  4. Preparing retirement planning cash flow analyses to determine if current deferral and savings will suffice based on the client's time horizon.

Gifting Strategies

Dependents and filing statuses offer a view into gifting strategies to minimize a taxable estate. In addition to annual exclusion gifting, you can explore education planning (including Section 529 plans) and gift exclusions. Another possibility is to make tuition payments directly to an institution. You may also recommend medical expense planning to your clients, such as gift exclusion for payments made directly to a medical service provider.

Multiyear and Multigenerational Planning Opportunities

If your clients are like mine, they want to ensure they are leaving sufficient funds for their retirement, as well as enough money after they pass for their spouse, children and grandchildren. You should look for multiyear planning opportunities, especially in light of the American Taxpayer Relief Act of 2012 and the 3.8% net investment income tax.

In the 1040, take a look at retirement plans and distributions to discuss Roth IRA conversions, and don’t overlook new adjusted gross income thresholds that could be surpassed with income from a conversion in one year. Run projections on a multiyear basis and present cash flow analyses on converted amounts. In addition, discuss future income and deduction items within the client’s control that may be able to be timed to result in a lower long‐term tax liability.

Keep Clients for Life

There are enormous benefits in helping your clients plan for their future. You’ll receive work that is commensurate with your knowledge, expand your services and develop more referral sources with other professionals. More than anything else, you’ll keep clients for life.

For more information, download the AICPA’s PFP Section’s “Analysis of a Tax Return for Personal Financial Planning.” Developed by Lyle Benson, CPA/PFS, this checklist that offers a comprehensive review of the 1040.

Want more tips and guidance?  Robert Keebler, CPA and I will present a webcast, “Proactive Planning: Opportunities from Your Client's Form 1040” on May 17 from 11 am – 12:45 pm, EDT. In addition to a discussion on how to use your practice to develop personal financial planning ideas for your clients, Robert and I will lead you section-by-section through the tax return and provide guidance on the application of key strategies and the best time throughout the year to implement them. PFP Section members receive a registration discount. Register today.

Brooke Salvini, CPA/PFS, Principal, Salvini Financial Planning. Brooke’s firm, Salvini Financial Planning, is a fee-only Register Investment Advisory Firm in Avila Beach, California. She specializes in comprehensive financial planning with the goal of helping her clients make better financial decisions in all areas of their lives. Brooke serves on the CalCPA State Committee for Personal Financial Planning, the CalCPA Foundation Investment Committee, and as a Trustee of her local Avila Beach Community Foundation.

Gold mine image courtesy of Shutterstock

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