Get Ahead of Collecting New 2021 Client Tax Data

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Suffice it to say that the last three tax seasons might be the worst three in the history of forever. If not, all three might be in your bottom five all time. And the 2022 season is not shaping up to be much better. We still lack clarity on some key 2018 TCJA items, we had about half a dozen tax law changes in the last two years dealing with the pandemic, and we have 2022 planning with potential tax law changes from the current administration.

While this can all sound a bit overwhelming, let’s take a logical approach to eating an elephant – one bite at a time. Today’s bite is getting ahead of some tax information that you know your clients aren’t used to providing: April’s stimulus payment and the advance child tax credit payments.

The IRS did indicate it will send Letter 6419 in January to provide the total advanced child tax credit for each taxpayer. But, we all know stuff happens. Clients move, amounts deposited will inevitably not match the letter, the client will lose the letter, etc.

The “what to do” here is not that difficult – it’s just new. In short, reach out to your clients now and ask them to get you the April stimulus payment and / or start tracking the advance child tax credit payments they receive. You can point your clients in the right direction by asking them to look at their bank statements for April, and July through December. Easy peasy and we should be done, right, because our clients always listen to us, right?

No, not easy peasy. This is brand new. So, we help them some more with the “how.” The specifics are up to you and what will work best for your client base. Are they paper people? If so, send them a bright neon piece of paper with the seven fields to fill in. Add some other fields, too, like estimated tax payments. Give them a company magnet and ask them to put it on their fridge next to their kids’ artwork. Every time they see the neon colored paper they’ll be reminded that something is weird and different this year.

Are they electronic people? Can you set up a form on your website they can fill in? You can periodically check the status of your clients and reach out before the end of the year. Set up reminders for yourself once a month to track the clients’ progress. Maybe skip September and October because those are busy compliance months. But you can check in November and use it as a conversation starter for year-end planning.

When they get the IRS letter in January, they can check their records against the IRS letter. If they match, great! But when they don’t, the client already has the information pulled together for the inevitable automatic payment matching notice they will receive right after filing. It might take a minute for the IRS to get the refund correct after responding, but all the info for the response will be ready to go.

So far, all these “why’s” are centered on making your world easier / better. But, a “why” that is client-centric is where you can make a difference to the client and get them to give you what you need. This is new to them, they aren’t used to getting this info. So, what’s in it for them?

The result, that’s what’s in it for them: Are they getting a refund or do they owe money?

From our perspective, we understand the technical moving parts that are happening this year between the normal income / withholding, economic stimulus payments, and advance child tax credits. The number of possible outcomes is dizzying for a client and they don’t need all the technical items right now. What they need today is simpler – their “why”:

If they get you the info you need sooner, you will know sooner whether they are getting a refund, or if they owe. If they’re due a refund, you can get it filed and get them that money as soon as possible. If they owe, they will have more time to pull the money together. Owing at the end is not fun, but if a client owes, I’m sure they’d much rather they had two months to find the money than two weeks.

And if you combine the client why with the electronic data capturing, you may be able to complete a few more tax projections this year to give your clients even more time to adjust to their expected results.

For the practitioners – take advantage of an opportunity to take some of the sting out of what will be another interesting tax season.