The 2014 tax season is now here, and this could be the busiest time of year for many advisors. Among the many challenges of tax season is that it can become too routine; you simply follow the same process year after year. If this describes your firm, you are potentially missing out on efficiency opportunities for your firm and an improved service experience for your clients. Here is a quick list of best practices for this tax season.
A successful tax season starts with how you communicate with your clients. Consider writing a letter or producing a webinar or video that covers important details. Items to highlight should include important tax deadlines, tax-exempt (retirement) account items, 1099 information and 1099 delivery schedule. Your clients are inundated with tax information during this time of year, so be succinct with your communications.
A common area for confusion is which report your client should use for reporting gains and losses: the report from your firm, their custodian or both. Whatever you decide (and make sure you are clear on this decision), it is very important that any duplicate information between the reports is reconciled. With today’s technology, there shouldn’t be any surprises in this area. Reconciliation of this gain/loss data should be happening throughout the year, and is especially critical for transactions that are considered “covered” under the IRS cost basis reporting rules (see “Cost Basis Reporting: The Gift That Keeps on Giving”). Speaking of cost basis, this is also a good time to revisit the default accounting methods set up on an individual account.
Perhaps one of the more frustrating aspects of tax season is when you are waiting for a 1099 to be delivered for a client account, especially when the 1099s for the same client’s other accounts are already complete. To help ease some of the frustration in this situation, you should be able to work with your custodian to determine the asset or assets that impact the delivery of the completed 1099. Knowing the holdings that are delaying the 1099 should also help in researching and ultimately determining the estimated delivery date of the 1099 report.