How to Help Clients Proactively Reduce Taxes

Finding tax reductions is often a high priority for clients, but the complex nature of tax policies can leave them feeling overwhelmed and discouraged. To help your clients proactively decrease their taxes, offer them simplified insights to navigate deductions. By providing your clients with a simplified version of what they need to know before filing, they’ll be able to get the most out of their tax return.

Prepare for the meeting
Before providing information to the client, take some time to review their last two years of tax returns to make sure the filings are consistent and that nothing was missed in a specific year. This will help you identify what should be done for this tax year.

It’s also important that you understand your clients’ current tax bracket to ensure your recommendations will not throw them into a higher, unintended bracket. You’ll also want to monitor the modified adjusted gross income (MAGI) calculations for Medicare tiering cost, so that all recommendations don’t place them in a higher Medicare Part B premium tier. Having this background knowledge of their previous filings and potential reductions before meeting with them will allow you to provide more simplified, easily digestible information to reduce their taxes.

Given the ever changing nature of our economy, be sure to also take current trends and legislation changes into account. This will give you a more in-depth understanding of the clients’ potential deductions. For example, the tax rates may potentially increase due to the 2017 Tax Reduction Act ending. With this change in mind, you’ll want to recommend your clients evaluate Roth conversion strategies, capture capital gains and re-evaluate the amount of dollars directed to deductible retirement plans. Being up-to-date with any current potential opportunities or risks will help you provide more quality, relevant advice.

Break it down to the basics
Deconstructing convoluted financial language can be difficult, so it’s best to identify the most vital parts of what they need to know and expand upon those. For instance, let’s say you want to ensure that your clients understand how income impacts the provisional income that taxes social security. To clarify this for consumers, pull some statistics to make the situation more relatable. In this scenario, you could explain how many people are in the 12% bracket and are already collecting Social Security; having additional income could actually cost them as much as 30% more in real tax above the actual bracket. Finding ways to simplify concepts that are hard to grasp will allow your client to gain more value from your advice.

Consumers often miss opportunities for tax benefits or deductions when filing due to the technical jargon used. Calling out things most tend to overlook will allow your clients to be more aware of how they can maximize their returns. For example, many clients don’t capture all of their tax credits, such as earned income credits, credit or daycare, because they don’t know that they’re available to them. Let’s say your client has children in after school and summer programs – you can recommend that they file for tax credits here, as these programs qualify for the child care credit.

There are many ways for your clients to get the most out of their return, but they often don’t get the opportunity to benefit from them just because they can’t decipher the language. Providing them with tailored, personalized tools to easily locate which deductions and benefits they’re eligible for will set them up to maximize their benefits, reduce their taxes and foster a long-term client-advisor relationship.

Curtis V. Cloke is the CEO and Founder of THRIVE Income Distribution System, and has been in financial services for more than 20 years. Curtis is a 21-year MDRT member, with 3 Court of the Table and 15 Top of the Table honors.