Why Do You Have the Clients That You Have?

tax planning
iStock_Ridofranz_tax planning
Craig W. Smalley, EA
Founder/CEO
CWSEAPA LLP
Columnist
Share this content

My oldest son is 18 years old and he’s decided to major in accounting. I hired him on as an intern, which has allowed me to work alongside him. One day we were going through the client list and I explained to him how I obtained this or that client. I did this so he could put it into context when he saw them in the office.

Each client had their own unique story. We finally got to the “Joneses.” Obviously, that isn’t their real last name, but this is such a good story that I wanted to share it.

A long, long time ago, in a galaxy far, far away … well, not exactly, but about 20 years ago, I had just become licensed. I’d been doing tax returns for about three years and I met a client who had moved to Orlando from up north. They had started a business and had a net operating loss. They got audited and asked me to represent them.

As I stated, I had just gotten my license and had never gone through an audit before. However, it was obvious why my client was being audited. The IRS wanted to know what the couple lived on. As it turned out, the husband’s father had died the year before, leaving a $500,000 life insurance policy that was split two ways between the husband and his sister.

I decided to take my clients with me to the audit. I know what you are thinking: That’s a rookie mistake. But I had a plan.

Before the meeting with the auditor, I took my clients to lunch and worked out the plan with them. I told them not to talk to the auditor unless I allowed it and to let me handle the meeting. This strategy was a gamble, but I took it. I was younger then.

We met with the auditor, and after exchanging pleasantries, I got down to the heart of it. I told my clients, with the auditor sitting there, that we were at the IRS because the IRS wanted to know what my client lived on. I confirmed this with the auditor, who shook her head yes.

I had arranged for my client to bring the receipts from the life insurance payout. I turned to Mr. Jones and said, “Mr. Jones, now your father died in that tax year, is that correct?” Mr. Jones confirmed my question. I pressed on, “Now, he left you $250,000 in life insurance, is that also correct?” Again, Mr. Jones agreed that was what had happened.

I then went in for the kill. “Did you bring the receipts for the life insurance with you?” Mr. Jones gave them to me and I then handed over the receipts to the auditor. The whole thing took less than 15 minutes and we were out with a no-change audit. Mr. and Mrs. Jones told me that I had just earned a client for life.

Am I genius? Hardly. Before we got to the audit, I did a little recon on the revenue agent. As it turned out, my very first audit was her last audit – she was retiring. She just wanted to close the case. My strategy could have backfired if it had been any other auditor.

The Joneses moved about an hour away from Orlando. But each and every year, we still have our tax meeting with them, and this year was no different.

At least my son now has some understanding of why this particular client keeps coming back.

Replies

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.