Close Close

Financial Planning > Tax Planning

An Advisor's Best Friend?

Your article was successfully shared with the contacts you provided.

Clients may not be fond of filing taxes, but advisors can limn clients’ financial lives using the 1040 form

Every spring, advisors help their clients get their tax information together for their accountants. They may even do the tax returns themselves. But how many advisors see Uncle Sam’s 1040 form as more than just a collection of boxes and numbers that results in either a check to be made out to the Treasury or a check you get from Washington? Benjamin Tobias is one advisor who sees more. A CPA, CFP, and president of Tobias Financial Advisors in Plantation, Florida, Tobias also teaches other advisors how to mine clients’ tax returns for questions and answers that may lead to new planning business.

In a presentation at this year’s FPA Retreat in Colorado Springs, Colorado, Tobias went through a number of questions advisors might pose after poring over a client’s 1040. For example, an item as simple as alimony payments can trigger a discussion of a client’s marital status and any obligations to previous spouses. Or an entry for rental property income on Schedule E might get the advisor and client talking about what the property is and whether it’s something that is being rented to the client’s business. Entries for real estate taxes, meanwhile, can lead an advisor to ask whether the client has a vacation home and whether it is being rented out.

An entry on Schedule E for income or losses from partnerships or S-corporations, meanwhile, could lead an advisor to ask whether the client is holding on to limited partnerships purchased in the 1980s. “You may be able to use passive losses and ask how they feel about these investment vehicles,” Tobias says.

An entry for self-employment taxes gives an advisor a chance to bring up the differences among corporations, limited liability corporations, and other business entities, Tobias says. The advisor could then look for any deductions for medical expenses and get into a discussion of the client’s insurance needs. Another job-related item is unreimbursed business expenses. A self-employed client, Tobias points out, might benefit from using a different business entity where expenses could be more readily deducted.

Tobias typically needs at least two to three hours–and sometimes an entire day–to analyze each client’s tax forms. Given the time he spends, he reserves this service for those who have already agreed to employ his firm. He also says a tax form can provide at least one hidden benefit to the advisor. An entry for tax preparation fees can prompt an advisor to ask, “Do you like your CPA?” Although Tobias is an accountant, he says that two-thirds of his clients use other CPAs to do their taxes. He sees no reason why advisors who can handle tax preparation shouldn’t use the 1040 as a business-development tool as well as an information gathering one.


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.