More than half the year is behind us, and now you are beginning to focus on corporate and personal extensions. It is equally important to make sure your late filers are submitted and that all of your clients are positioned properly for their 2019 tax returns. You do not want to wait until the last week of 2019 or, worse, April to learn of potential issues your clients may encounter.
It would be a great idea to reach out and see if they have had any financial events so far this year that were out of the norm. This should prompt them to contact you and discuss what took place. The financial event in question may or may not have an impact on their tax standing, but it is easier to review, guide, plan and protect them from problems if you are aware of them in advance. Once you are aware of what has taken place, you can advise your client on their options and propose the best course of action. You are much better off knowing there's an issue on October 15th than March 15th while you're elbow-deep in everybody's returns.
Accounting professionals who also provide financial planning or investment advice should make it a habit of asking their clients on a regular basis, at least two times a year, if there has been anything in their financial life that would warrant making any changes or adjustments to their plan. You would be amazed as to some of the things we have been informed of at these meetings. The answers range from "I lost my job three months ago" to "I sold my house and we are moving across the country," and all just by asking a simple extra question. You would think these would be things they would be calling you right away to discuss, but, unfortunately, life gets in the way sometimes. Asking this simple question should allow you to review, correct and advise your clients as to the best course of action now that you're aware of the new information.
Reaching out for a mid-year review can have a substantial impact on your practice. It doesn't just allow you to catch up with your client and learn of any new issues. This would also be a good time to review year-to-date capital gains and interest income from both their portfolio with you as well as assets outside of your control. This will save significant time when it comes to the end of the year because you will have a good idea of their current standing and be able to plan accordingly.
The last thing I want to leave you with, as we enter the end of the year, is to have your clients be careful purchasing mutual funds in non-qualified accounts. This has been something that has really caused many clients and their accounting professionals a lot of grief. As mutual funds begin to announce capital gains distributions for the year's end, it is important to know what the distribution is and when it will be taking place. We have seen clients purchase mutual funds in late October, November and December and receive huge capital gains distributions, which are taxable because they purchased a fund just prior to the distribution. Imagine owning a fund for a couple of weeks and getting a $10,000 capital gains distribution. This is not a fun conversation, and you can save your clients significant grief if you educate them on this potential. It may be ideal for your client to hold off on investing new funds or use an ETF until the distribution has been completed.
The importance of the mid-year review is to make sure that both you and your client are on the same page and no surprises will come at tax time. Your busy season is crazy enough, and you might as well make things as easy and problem-free as you can. It goes back to the old adage: An ounce of prevention is worth a pound of cure. Enjoy your mid-year reviews! You never know, you may learn some great things about your clients and get some referrals in the process just by looking out for them.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.
Lawrence Sprung CFP® is the President and Founder of Mitlin Financial, Inc. He entered the financial industry in 1996 and continues to be inspired and energized by the challenge of helping his clients achieve and even surpass their financial goals.
Mitlin Financial, Inc. is an SEC Registered Investment Advisor (RIA) that prides itself on...