How to communicate large tax bills to your clients

As a CPA, EA, or tax preparer, busy season seems to get longer, more stressful, and more complicated every year. Many of you quietly bemoan your clients for procrastinating or being disorganized with their financial documents, but have you ever thought about tax season from the client’s side?

I’ll bet you have many clients who are secretly ashamed about their financial situation, particularly if they owe a large tax bill. So it’s no wonder they don’t want to rush out to you and have the financial equivalent of a root canal.

As your clients’ most trusted tax professional, you are in a unique position to provide guidance and support. After all, clients who feel understood and supported by their advisors can learn to become proactive and well-organized about their money situation. Let’s examine how acting like a financial therapist can transform your practice and your clients’ lives.

Dr. Kristy Archuleta, Ph.D., LMFT, CFT-I, a renowned researcher, speaker, and pioneer in the field of financial therapy, recently mentioned on my podcast that many people consider money a taboo subject. She also said embarrassment about one’s finances cuts across all income levels. Like it or not, as a tax professional, you may be the only person a client feels comfortable opening up to about their financial situation.

“It’s essential to create a safe and non-judgmental environment for them to express their concerns openly,” asserted Archuleta. “Like a therapist, you must listen actively and empathetically to your client’s situation. They may have a lot of anxiety about their tax bill; it’s your job to alleviate some of that stress.”

I agree with Archuleta that you should take the time to understand your client’s financial situation, goals, and concerns before you let your inner “advice monster” come out. Ask open-ended questions to gather more information. Allow clients to share their thoughts and financial anxieties with you before you start making recommendations and offering solutions. Ultimately, clients just want to be heard.

Always start client conversation in a positive way. Just as therapists use the “stroke and kick,” technique to highlight a patient’s progress before addressing problems, Archuleta said we can use a similar approach. “Focus on the good things that your client accomplished during the past year, which led to a higher income (and thus, the higher tax liability.”

For example, if your client is an entrepreneur who had a successful year, remind them that their hard work paid off and that they should feel proud of their accomplishments. By emphasizing the positive aspects of their financial situation, you can “soften the blow of the tax bill,” she said.

Allow clients to share their thoughts and financial anxieties with you before you start making recommendations and offering solutions. Ultimately, clients just want to be heard.

I have found it’s always helpful to communicate the tax bill in a way clients can understand. We often forget how complicated the tax code is, and that their eyes easily glaze over when you dip into jargon. Instead, break down the numbers and explain patiently how their tax bill was calculated—and how they can reduce their tax liability in the future by making estimated tax payments, contributing to a retirement account, or by making more charitable contributions. Educating your clients empowers them to make better informed decisions about their finances.

When working with couples, it’s crucial to recognize that both partners may have different reactions to a tax bill. According to Archuleta, each spouse may have different ideas about how to spend the money they have saved. They may disagree about whose financial decisions or under-withholding contributed more to the tax bill. By acknowledging both spouse’s point of view, you can help them come to a mutual understanding about their financial situation.

CPAs can also borrow a page from therapists to address underlying emotional issues that may be contributing to a client’s financial stress. Research shows many people’s relationship with money stems from the money messages they received growing up. For example, your client may have a fear of scarcity or believe they are not worthy of financial success. By identifying and addressing these underlying beliefs, you can help your clients feel more empowered and confident about their financial situation.

You have a unique perspective on your clients’ financial lives. Create a safe and non-judgmental space for them to share their concerns without being judged. By integrating empathy and emotional intelligence into your practice, you can build stronger relationships with your clients and provide them with the support they need to achieve their financial goals.

Key takeaways

• Clients just want to be heard. They want a safe space where they can air their concerns about money without being judged or lectured to.
• Take the time to listen closely to your client’s financial concerns before unleashing your inner “advice monster.”
• We can learn to use the same “stroke and kick,” approach that therapists use.
• When working with couples, remember that each partner may have a very different relationship with money.