Timely Tax Tips for Fall

Today, we’re going to cover a few different topics to help get you up-to-date on key IRS issues, and, we’ll start out with a little bit of practice management wisdom to encourage you to treat yourself better.

So Many Notices, so Little Time

Practically everyone is getting calls, emails and texts from clients who have IRS and/or state notices that need to be addressed – yesterday. Yup. That’s right. Often, you only about 1-3 days to respond. Why? Because our clients haven’t bothered to open up their mail and let us know about an impending deadline. Or worse. They did know and didn’t have the courtesy to forward the correspondence while we still have breathing space to respond (10-90 days). Now, they expect us to drop everything and help them – right now.

Get the full Timely Tax Tips for the Fall CPE course

 

 

Which means, even tax practices that aren’t flush with clients are working year-round. Often, the busy-work comes from responding to the IRS and state notices. Sometimes, they are slam-dunk correspondence. Other times, there’s some real work involved. Why? Generally for one of two reasons:

1) We made a mistake and left something off the return – or didn’t understand where to report it, and now we have to straighten it out. These corrections should be done at no charge. After all, they are our own errors.

2) The client neglected to give us a document, or tell us about some income…and now we have sort out the issues. And we will probably have to help them deal with additional taxes, penalties and interest – and a way to pay all this. In particular, we are getting notices about Obamacare information missing from the tax returns. Our clients told us they didn’t get anything, right? Uh huh.

What are YOU Worth?

Too often, tax professionals tell me that they feel bad, or guilty in the second situation. Somehow, the fault must have been theirs. So they don’t charge a fee to help their clients resolve these issues.

Really? Truly? Why do you value yourself, your costly education, your continued training and years of skills so lightly? You really should be charging for these services. In fact, the later they get these notices to you, the longer it will take you to resolve the problem. AND you have to drop what you’re doing and get that signed power of attorney (POA) immediately (while the client takes his/her time to get it back to you), and get on the phone to the IRS or state Hotline (IRS Practitioner Priority Service – 1-866-860-4259). And you might sit there for an hour or more to get through. E-Services can’t help you, unless you have filed your POA for that client in the system long before.

SPECIAL TIP: That’s not a bad idea. Each year, you could get a new POA from your clients for the IRS and state, and file them with the CAF (Centralized Authorization File) Unit early in the year. That way, you can get into their transcripts and records immediately, when an issue arises. This is especially important when dealing with elderly clients, and those who tend to be disorganized.

I recently heard from an Enrolled Agent who has been taking our Tax Practice Series. She was in awe. A client walked in and practically begged to pay her several thousand dollars for something she used to do about $150 or so. While we teach you how to represent your clients and how to solve problems, large and small – we also teach you how to command a reasonable fee – and to get it.

The truth is you don’t really need anyone to tell you how valuable you really are. Sometimes, it does take a deep breath and a mess of courage to ask for a lot more money than you usually charge. Some existing clients will balk. Especially if you haven’t raised their fees in many years. Actually, that’s a good way to screen out clients you don’t really want. One way to convince them this is reasonable is to be prepared when you present your fees. Show them how much their income has increased during their years with you. (Folks who have been with you for 5 years or more, their income probably increased by 25% - 100%. If they’ve been with you for 10 years or more, their income has probably more than doubled or tripled.)

Time to Cull the Herd

I know it’s hard to cut loose clients who seem to love you and depend on you – who cannot live without you. I fell into that trap for years, keeping clients who didn’t really cooperate, gave me a lot of stress, tracking down missing information, fielding their constant emergencies. Getting rid of them improved my health, reduced my blood pressure dramatically, and freed up my time to accept more profitable clients. And you know what? Those people who were my “best friends” and who “couldn’t live without me?” I haven’t heard from them in years – except an occasional Facebook interaction.

Frankly, anyone who trained in a CPA firm or a law firm knows that all staff keeps detailed “time sheets” noting communications with clients, correspondence on behalf of clients, and all work for clients. Depending on the firm, the work will be billed out in 10 – 15 minute increments. Even a 2 minute phone call might be worth 15 minutes on the time sheet. That’s why staff might sometimes be billed out for 10-15 hours, while working an 8-hour day. That makes up for other non-billable time, like continuing education, internal administrative time, etc. Perhaps it’s time to re-evaluate how you use your time?

Got Your Mary Janes?

As ever more states legalize some form or marijuana, we will have to help our clients address the issues. Most banks won’t accept accounts from these businesses because they will lose their FDIC coverage. The banking and legal issues don’t just affect medical and recreational purveyors of cannabis. “Associated businesses” are also affected. Due to the FDIC’s (Federal Deposit Insurance Corporation) tough stance on dealing with marijuana businesses, banks are also concerned about associated businesses. What are associated businesses? These are some examples:
• Banks
• Landlords
• Insurance
• Testing
• Security
• Hydroponics industries – lighting, soil, fertilizers, irrigation, power management, utilities,
• Attorneys, Accountants, Enrolled Agents, Consultants
• Non-pot vendors
• Advertising
• Packaging & supplies
• Staff training

For instance, a Realtor® reported that a landlord’s lender terminated the mortgage on his commercial building when the bank learned that the tenant was selling marijuana. The landlord had to rush out and get a new loan somehow. His only alternative ended up being private financing. The landlord didn’t want to evict the tenant since the tenant was paying double the going rate for rent – and paying it all in cash. As a result, the interest rate on his loan jumped about 70% - from 5% (with the bank) to 8.5% with a private lender.

Watch out for similar repercussions from your bank, since you are an associated business. Especially if you advertise that you will work with that industry. Generally, the banks don’t seek out these issues. But when a concerned citizen reports a case to them, they are forced to investigate the complaints. Make sure you learn more about the tax and other implications of the pot industry!

Get the full Timely Tax Tips for the Fall CPE course.

EARN CPE