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Mine Client Tax Returns for Financial Planning Opportunities

Tax returnAs you transition from tax season and begin thinking about new business, you may find that some of your highest quality leads are right in front of you. Many CPAs tell me they want to begin offering financial planning as part of their practice, but just don’t know how to get started.

One of the best places to start is probably right in from front of you – your clients’ federal individual income tax returns. The return is your easily-accessible roadmap to their financial planning needs.

Consider the following:

  • Form 1040 is a goldmine of information. Just looking at the list of dependents should help you address child education and elderly parent concerns. Knowing whether the client is employed or self-employed allows for a discussion on retirement planning, savings and contributions. Is the client collecting Social Security? If so, explore strategies to maximize benefits and reduce the income-tax impact of receiving those benefits.
  • Schedules B, D and E provide investment insights. On Schedule B, you can quickly identify the client’s investments, useful information that helps facilitate a conversation about the client’s diversification, risk tolerance and goals. Is there a capital loss carryover reported on Schedule D that can be used to offset aggressive trading gains? On Schedule E, where investment income is reported, does the client have passive income or losses? These insights could lead to discussions on the status of various investments.
  • Itemized deductions offer even more. The list of medical expenses on Schedule A leads to a discussion about the client’s general health, insurance coverage, health savings accounts and long-term care insurance. If the client is at or approaching age 65, you can talk about Medicare options. What may seem obvious to you may be totally missed by your client. For example, if the client is self-employed and filing Schedule C, look at the income and deductions. Has he or she maxed out retirement plan contributions or adopted a medical reimbursement plan?

Keep in mind that IRC §7216 requires you to obtain your clients’ written consent before using their return to solicit additional services, but don’t allow the requirement to deter you. You’ll find that most clients want you to be proactive and reach out to them on a regular basis to help with matters other than tax planning and preparation. You’ll be amazed at their reactions when you reach out to them with information that has a direct impact on their future, especially when it comes to financial planning. Because the consent form must be updated annually, in future years you can include it with your engagement letter for tax services.

For more planning ideas from your client’s tax returns, check out “Free Resources from the AICPA PFP Section” below for a checklist I created to help mine the 1040 for financial planning opportunities. 

Financial Planning Resources

Free Consumer Webcast

Invite your clients to a free webcast at 1 p.m. on April 23, hosted Chris Benson, CPA/PFS, explaining how your clients can use their tax returns to create a comprehensive financial plan.

Free Resources from the AICPA’s Personal Financial Planning Section:

  • Comprehensive checklist to help find PFP opportunities in your client's tax return
  • Resources to transition from tax preparer to financial planner
  • Chapter one of The CPA’s Guide to Financial and Estate Planning, Volume 1

Lyle Benson, CPA/PFS, CFP®, President and Founder of L.K. Benson & Company.Based in Baltimore, Lyle’s firm specializes in personal financial planning, tax and investment advisory services for high income individuals and families, as well as corporate executives and entrepreneurial, closely held business owners across the country. Lyle is chair of the AICPA’s PFP Executive Committee.

Tax return image via Shutterstock



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