7 Key Communication Points for Your Clients with Extended Returns

As the final extension deadline of October 15 (for individual clients) approaches, it is hard to believe it is almost time to flip the calendar to another year. Although finalizing your client’s 2015 Form 1040 is the most pressing item on the agenda, it’s important to focus on year-end planning. The good news is that with the tax legislation signed last December, tax planning should be easier since many provisions were extended through 2016 (or longer) or made permanent. However, this is a presidential election year, and there is uncertainty about how a political change might impact tax reform and/or legislation.

Let’s focus on the good news (and what we can do for our clients). Here are seven topics to discuss with your clients as you wrap up their 2015 returns that will provide them the extra client service that they expect and deserve.

Year-End Planning for 2016 and Forward

Now is the perfect time to schedule a November or December appointment with your clients for any follow-up action. As you are calculating clients’ third and fourth quarter estimated tax payments, you should discuss with them the circumstances that have changed for 2016 and whether any withholding adjustments might be necessary. For example, does it make sense to make their fourth quarter state income tax payment in December? It is possible these decisions can be made with a meeting in September or October when wrapping up the 2015 return, but you’ll likely need to schedule another time to circle back with your clients to make sure the year wraps up in the way they expect.

Retirement Contributions for 2016

Remind clients to double check their contributions in their 401(k) plans while there is still time to make a payroll adjustment in order to maximize the contribution for 2016 ($18,000 or $24,000 for those age 50 and over). Also, for self-employed clients, now is a good time to discuss retirement plan options, such as a SEP IRA, Solo 401(k) or a SIMPLE IRA. Clients love it when they can save tax dollars by paying themselves!

Investment Opportunities

Consider collaborating with each of your clients’ investment advisers to plan for potential capital gains/losses and the tax ramifications. So, rather than relying on your client to relay the information correctly (to both sides), ask him or her to provide you their advisor’s contact information and grant you permission to disclose information. Or, you can schedule a meeting where all interested parties are present to discuss the different scenarios that might affect the client’s 2016 (and forward) financial situation. It is usually a win-win situation for everyone – your client’s investment advisor will likely appreciate learning more about the tax implications of investment decisions and your client should think of you as more than just a tax preparer; you’re now their year-round trusted advisers. For more tips on coordinating investing and tax planning, view this webinar that defines tax-aware investing.

Data Protection

It will be a good day when we can stop talking about identity theft and tax scams, but unfortunately, identity theft is an ever-present threat to individuals and tax practitioners. The IRS recently launched a campaign entitled Protect Your Clients; Protect Yourself aimed at increasing awareness among tax professionals. Additionally, the AICPA’s Tax Identity Theft Information and Tools page provides client letters, checklists and other resources to help practitioners dealing with this issue.

As you meet with your clients during year-end planning, it’s always a good idea to remind them to:

Keep their computer secure

Avoid phishing and malware

Protect personal information

Contact you if they suspect they are a victim of tax-related identity theft

Planning for Health Insurance and Other Related Healthcare Costs

Another potential client conversation topic is healthcare. Ensure that your clients understand provisions of the Affordable Care Act that apply to them. If they need to obtain health insurance coverage, remind them about the open enrollment period from Nov. 1 to Jan. 31, 2017 for the Marketplace. Discuss their healthcare costs for the current and future year, and ensure they spend their health flexible spending arrangement money, which is “use it or lose it” (see IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans).

Gifting Strategy

Rather than waiting until the year is over to discuss whether a 2016 gift tax return is necessary, talk with your clients now about their gifts. Discuss what they have already given in 2016, make sure they understand the $14,000 exclusion and have taken full advantage of it, and determine whether it makes sense to make additional gifts for the remainder of 2016.

Charitable Giving

As part of your year-end planning client conversations, talk with them about charitable contributions. For example, a client may want to make a large gift to satisfy a church pledge. Certain clients may benefit from transferring an appreciated security to a charity. And, for those charitably-minded clients who earned more money this year, consider discussing the tax benefits that different levels of contributions would provide. Year-end planning is the perfect time to have these conversations and help your clients with this analysis.

Good luck with the successful completion of extension season and remember that it is worth taking that extra hour now to provide value to your clients in the upcoming year.

April Walker, CPA, Lead Technical Manager- Tax Practice and Ethics, American Institute of CPAs.

Seven courtesy of Shutterstock.

7 Key Communication Points for Your Clients with Extended Returns

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