Reducing your income taxes may require a different approach than your current annual routine. That’s because the standard approach to filing a return – gathering mailed tax forms and other tax information, completing the accountant’s questionnaire, submitting the information to your accountant, and hoping for the best – limits your accountant’s ability to recognize your unique tax reduction opportunities.
We have gained insight from working with our clients’ accountants, whom we often invite, along with their other advisors (attorney, investment advisor, insurance professional), to meet about a client’s wealth management needs. We find that a team of advisors with diverse backgrounds and areas of expertise produces a great brainstorming session for a client. Beneficial ideas for the client often emerge from this meeting.
One of the first documents we present at such a meeting is the client’s net worth statement – a snapshot list of assets and liabilities summarizing the client’s total financial situation. Rarely do accountants have this comprehensive view of a client’s situation so seeing this document, the client’s accountant often reacts as if they are meeting the client for the first time, even if they have been a client for years. As we review the document line-by-line and give context to the items on the statement, the accountant’s creative “light bulb” usually turns on and beneficial ideas start pouring out.
To take advantage of this phenomenon with your accountant, we recommend these four steps:
- Schedule an in-person appointment with your accountant – Pick another time of year than Spring and Fall, which are particularly busy times for accountants as they work to meet filing deadlines. A teleconference will suffice if necessary
- Present a succinct, current and complete snapshot of your financial situation - A net worth statement is ideal.
- Be prepared to tell the story behind the numbers – Remember: Your financial situation is unique. The items you mention can stimulate creative, tax-reducing ideas from your accountant.
- Repeat the process as often as recommended by your accountant.
Of course, these steps are not guaranteed to reduce your taxes, but they give you the best shot at retaining more of your money. A less-obvious benefit is that your return will stand out amidst the sea of tax returns your accountant processes each year. You may receive special attention, which can also lead to beneficial ideas. Who knows? You may be fortunate enough to hit a tax reduction home run.