The Top 5 Ways to Set Your Clients Up For A Successful Tax Season

Tax season can be one of the most stressful times of the year for taxpayers and tax professionals alike—there’s even a WebMD article specifically around managing that tax-time stress! Whether it’s the possibility of owing money, the stress of not preparing or filing taxes correctly, or the perpetually changing tax laws that affect tax prep year-to-year, it’s safe to say the stress is justified. Your clients are no exception, and as their advisor, you are in a great position to help minimize the stress and frustrations that surround taxes. There are opportunities where you can even help guide your clients through the process. 

From referring your clients to a trusted CPA to utilizing an outsourced tax solution so you can act as an advocate if need be—you are a tremendous asset for your clients. Luckily, here at XY Planning Network, we have a team of certified tax experts on your side and want to see you and your clients have a successful tax season! I’m here today to share our top five tips and tricks for you to consider as you look to support your clients ahead of and throughout the tax season.

#1: Get a game plan together for the tax season sooner rather than later.

I get it—once taxes are filed for the year, it’s “out of sight, out of mind” until the next tax season rolls around. However, it’s better for your client to have a plan set in place in the later months of the year around if they are going to “DIY” their taxes or if they want to engage with an accountant or tax professional to prepare their taxes.

If your client decides they need help and aim to work with a tax professional to prepare their taxes, they should start thinking about engaging with a tax pro in November (at the latest!). Similarly to you and your firm, accounting and tax firms (not H&R Block, mind you) also have a limited capacity to take on clients, so your clients may be competing with others as they look to engage with an accountant or tax professional. Start interviewing and meeting with accountants or tax professionals sooner rather than later and get a good understanding of how they operate, what their capacity is, and whether or not it’s a good fit for your client’s needs.

#2: Encourage your clients to have all of their personal information and tax documents ready for your tax preparer well in advance of the tax deadline.

While the tax deadline these past two seasons was pushed to later dates in the year (looking at you, global pandemic), the tax deadline for individual tax filings is usually April 15th. If your clients want a guaranteed on-time filing, they should have all or most of their tax documents submitted to their accountant or tax professional at least two months in advance of the deadline.  

It’s not to say, though, that you must have everything ready to go or else your tax pro won’t start prepping the tax return. Rather, the more documents you and your clients have gathered at the start of the engagement (this includes all physical tax documents that come in the mail as well as electronic PDFs that need to be downloaded from online accounts), the quicker your tax pro can get started and turn around their return. 

For more information/guidance on what you/your clients should have ready/start to gather, read our article “Everything Independent Financial Advisors Need to Know to File Their Taxes,” courtesy of one of our Tax Specialists.

Pro-tip: if your client is new to the accountant/tax pro, be sure your clients provide at least two years’ worth of prior-year returns as early as possible so they can get your information in their system!

#3: Keep track of the accounts, contributions, etc., that you and your clients set up throughout the year.

As a complement to the above tip, there are certain things you and your client can track now ahead of the season. Here are a series of examples/circumstances you and your clients should be aware of: 

• If your client makes charitable contributions, have them track those contributions as they happen rather than hurry to gather that information during the season. When making a charitable contribution online, save the confirmation immediately to a folder on their computer. Better yet, if their tax pro has a client portal that allows clients to upload/share files, have them upload each confirmation file to that file-sharing system. For an additional layer of protection, they can even add it to an Excel or Google Sheet. That way, when tax time comes, this information is already accessible, which will make your life, your client’s life, and their tax pro’s life much easier! (Note: This can also be done with medical expenses.)
• If they exercised or sold employee stock options, make sure to track and provide all supplemental cost basis information to your tax professional: e.g., documentation of the exercises or any supplemental cost basis information that the broker or company may have.
• If they placed a rental property into service, provide your tax professional with the cost basis (generally the settlement statement of when they purchased the property) as well as an assessment showing a breakdown between building and land.
• If they received stimulus payment #3 (Economic Impact Payment 3), save the letter that accompanied it to provide to your tax professional.
• Last but not least, be sure to flag and document any important events that you/your client should provide to your tax professional (backdoor Roth, sold a property, etc.).

#4: “Extension” is not a bad word, and filing an extension may even be the best course of action for your client.

For anyone who has filed their own returns in the past, either via TurboTax, 1040.com, or another tool, the phrase “filing an extension” can be daunting and nerve-wracking. But it doesn’t have to be! There are many reasons why filing an extension may be better for your clients rather than filing on time.

In general, extensions give everyone more time to prepare and file the tax return. If your client has something major going on in their life and can’t devote the time or energy needed for tax prep, there’s no reason to stress and hurry to meet the filing deadline. By hurrying the process, there’s an increased chance of missing information, thus filing the return incorrectly. In this case, filing an extension will provide ample time to make sure your client can devote the appropriate time and energy to whatever is going on with them personally and not rush the tax preparation process.

For more information about extensions, be sure to read our article “Considering the Benefits of a Tax Extension as a Financial Advisor,” courtesy of one of our Sr. Tax Managers.

#5: It’s better to overshare and provide irrelevant information than under-communicate and potentially miss information with your tax professional.

Simply put, all information has the potential to be good information. Occasionally, the random ancillary information leads to the discovery of a major taxable event that needs to be reported. While this doesn't necessarily make life easier, it does make the tax pro’s work more thorough.

Additionally, if you or your client is dealing with some major life event, share that with your tax pro so that a) they can be sensitive to that in any communication (maybe a parent is sick, they’re getting ready to have a baby, working on a super cool project, etc.), b) they can make sure there isn't some tax implication, and c) if the tax pro needs to prioritize their return in their filing queue or file an extension.

Tax season doesn’t have to be the most stressful time of the year, after all. There are steps you can take and things to get done ahead of time that can relieve almost all of the crunch often felt by tasks left until the last minute. After it’s all said and done, your clients will thank you for encouraging and guiding them well beforehand to make preparations and gather what they need. The “best tax season ever” is possible, and with you as their advisor, it’s what your clients deserve. If you have any lingering questions about specific scenarios or are interested in outsourcing to a dedicated team of professionals, XY Tax Solutions is in your corner to help you navigate all things tax.

About the Author

As the Operations Specialist for XY Tax Solutions (XYTS), Sara analyzes business operations and identifies client needs to bring the two closer together. She manages the flow of the workplace and optimizes day-to-day activities.