For the accountant, tax time is filled with chaos and beat-the-clock energy. Seemingly everyone wants a piece of you, and time is the one thing you don’t have. It’s hard to slow down even briefly to explain, reassure, and smooth ruffled feathers. But if you have clients you already know won’t be happy hearing they owe the IRS, you can bet you’ll be spending time with them one way or the other. Why not set the conversation up for success?
Understand their perspective
You probably have dozens and dozens of (if not more) returns staring you in the face already. Your goal? Get them done as quickly and accurately as possible, moving on to the next. The numbers don’t lie, so for you, a return or a bill are all the same. It’s what the numbers added up to.
For the client, however, the story is a bit different. Their concern is for the potential impact on their business or personal finances. If they expect a return and don’t get one, that’s nearly as upsetting as owing the IRS. Worse, if they expect a return but owe instead? Hoo, boy. It’s not about the cold, hard numbers. For the client, it can go much deeper.
The financial impact of unexpected expenses (or unrealized, but expected windfalls like a return) can seem, and sometimes are, devastating. So while no one enjoys it when a client flies off the handle, it is at least easy to see how they could do so. If you get yourself into the client mindset before having the conversation, it will help you empathize.
Structure the discussion
Whether you actually have a conversation with your client, or simply write up a quick cover letter, it’s good to have yourself armed with facts. Then proceed with compassion. Here’s a good way you can structure your conversation/letter:
Get the news out of the way first thing.
Don’t throat-clear or beat around the bush. Your set-up will tell them what’s coming, and they’ll grow more agitated waiting for you to just say it: “Unfortunately, you have a tax bill for this year.” You should probably also mention the amount up front. Rip off that bandage.
Show your understanding and acknowledge their feelings.
Okay, the news you just delivered stunk, but that doesn’t have to be the end of the discussion. Think about all the different ways in your personal life you deliver bad news. Do you just drop it on the person and walk off? Not likely. You might put a hand on their shoulder, or take other steps to reassure them. This should be no different. For example:
“I know this isn’t what you hoped for, and it’s certainly not news I enjoy delivering. Unexpected bills can be upsetting and disruptive; please be assured I’m here to help you cope however I can.”
This is a good place to discuss payment plans or other arrangements that could ease the burden for your client.
Be explicit about the steps you took and couldn’t take.
A quick walk through the facts of the return will demonstrate you thought it through. In fact, there’s a good chance that bad bill could have been worse had you not done some particular thing(s), and you should say so. That might look like:
“I looked at [insert deductions/exemptions/what have you here], and unfortunately you didn’t qualify. However, I was able to save you [insert a dollar amount if you like, or simply say “a bit,” or “a chunk.”] by [insert whatever magic you performed here].”
The point here is to demonstrate you didn’t just run this through a routine and accept the outcome; you thought about it. It doesn’t have to be (and probably shouldn’t be) paragraphs of detail. Just clean, simple facts: I tried X. I couldn’t try Y.
Take the time to walk through how they can avoid a repeat performance next year.
Okay, the news and the sympathies and the explanations are out of the way. Now, demonstrate even more value by helping them understand what steps they need to take to have a better shot at not owing next year.
Did they fail to withhold enough? Not file on time and now have fees and interest? Not report completely or appropriately? Bullet point the things the client can do for the coming year, and be clear that this should reduce the risk of owing. Of course, be very careful not to make any promises like “You’ll get a return next year!” But you know that!
Return or bill, there’s an opportunity!
Many tax clients only speak with their accountants at tax time. When your client owes, you can turn that into a reason they should be speaking to you more often — it can help you see where they might be going wrong with their finances during the year, so they can course correct before the year ends.
When they get a return, frame more frequent check-ins as an opportunity to not overpay to begin with. You know, but your clients might not, that a tax return is actually repayment of an interest-free loan to the government, not a prize check. Once you put it that way, they’ll be far more eager to come out near zero in following years (though there are those who make the return part of their personal money management strategy).
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