Why Didn’t My CPA Tell Me That?

When you start tax planning with a new client, the first thing people often ask is why the accountant or CPA they are using doesn’t think or act the way you do in discussing the hunt for possible tax savings. After all, the current CPA is smart, trustworthy, running a successful accounting business and trusted in the community. So, why are you telling them all these wonderful new tax savings ideas that their CPA has never mentioned? There are many explanations, but the simplest is how the accountants themselves view the job that they do.

Often, accountants think that the profession of accounting in its simplest form is the job of telling the story of money that has already come in or gone out, and they are reporting “history”, which is very different than telling a story that will “change history.”

What? Can accountants “change history”? No, they cannot. But, the history of money in and out doesn’t end when the event itself happens. It ends the day the accounting is sent to a taxing authority. And, even after it is sent, it can still be changed again! For instance, a client rolled an IRA to a Roth IRA and paid some additional tax on purpose as part of a plan. Then, later that year the client had a sister pass away and leave them another large IRA, which would also all be taxable and would cause a disaster level tax bill when added to the IRA Roth conversion done earlier that year. The IRS allows you to “change history” and un-convert the Roth IRA back to a regular IRA. The process is a retroactive event called re-characterization.

Many accountants see the job of accounting in a very narrow view, and looking around for additional tax savings, or even more so, changing business practices in order to lower the future tax bill is “not the job they are hired to do”. However, we think this is a very important part of any good plan. That’s why our firm states proudly that we are PROACTIVE TAX PLANNERS!

What’s the catch? Why wouldn’t everyone use tax planners then?

Mainly because tax planning comes at a terrible cost that most people just do not feel they can afford…..TIME!

Time answering questions, gathering documents and discussing and learning enough about the recommended changes to effect tax savings. Time learning something new. The cost is time and everyone is already so busy!

Our question to you is what is your time worth? If we had a 30 minute meeting to review your last two years’ tax returns, then a follow up meeting with one hour of sharing plans on how to pay less tax, and then up to two and a half more hours over a few weeks or months educating your current accountant and setting up new processes, and all you saved was $4,000.00, would it be worth it? Well, that’s $1,000 dollars per hour for your time! What if you are a business owner? The time is often the same and the savings can be $40,000 or more……would that time be worth $10,000 per hour?