Delivering bad news to your tax clients is never an enjoyable task. One of the most challenging aspects of professional tax preparation is informing clients that they owe a larger-than-expected amount to the IRS. However, it’s an inevitable part of the profession, and it’s crucial to handle such situations with empathy and effective client communication. In this blog post, we’ll guide you through the process of communicating large tax bills to your clients with care and professionalism.
Prepare yourself first
Before you even begin the conversation, be sure to prepare yourself mentally and emotionally. The news of a substantial tax bill can be shocking and overwhelming for your clients, and they may react with a range of emotions, from anger and frustration to fear and sadness. To ensure that you can provide support and guidance effectively, make sure you’re in the right frame of mind.
Take a few moments to gather your thoughts and emotions. Remind yourself that you are the bearer of important information and that your role is to deliver it calmly and help your clients navigate this situation.
Clients rely on you to provide accurate information about their tax situation, and sugarcoating or withholding the truth will only lead to more significant problems down the road. When discussing a large tax bill, be transparent about the reasons behind it and explain the calculations clearly.
Start by stating the facts. Explain the specific circumstances or changes that have led to the higher tax liability. Whether it’s increased income, reduced deductions, or other unexpected tax consequences, your clients need to understand why they owe more than anticipated. While the news may be unpleasant, clients will appreciate your honesty, and your assessment will help them understand how to avoid a surprise tax liability in the future.
The ability to explain and simplify tax topics is an essential client service skill for tax preparers, and it’s especially important when communicating a large tax bill. The tax code is complex, and many clients may not fully understand the intricacies of their tax returns. Use plain language to break down the details and provide a straightforward explanation of their tax liability.
While receiving the news of a substantial tax bill can be disheartening, you can help by providing solutions and options for how to pay a large tax bill. Help your client understand how they can set up a payment plan with the IRS and explore other options, such as borrowing from a retirement account in order to pay off the debt in full. In many cases, clients will end up paying far less in interest and penalties with this option.
Discuss potential strategies to address the issue for next year, such as adjusting their withholding, making estimated tax payments, or exploring available tax credits or deductions. You can also discuss potential financial planning strategies that might help them minimize their tax exposure in the future. By offering solutions and support, you can turn a challenging situation into an opportunity to earn your clients’ trust and help them take control of their financial well-being.
Convey optimism & empathy
Empathy is the key to effective client communication when delivering bad news. Put yourself in your clients’ shoes and understand their emotional response. Show genuine concern and compassion for their situation and let them know that you’re there to help them through this challenging period.
Convey optimism by focusing on the potential for improvement. Emphasize that, with your guidance, they can take steps to reduce their tax liability in the future or develop a manageable plan to address the current bill. Offer encouragement and reassurance, letting them know that they have support and options for handling this bill.
Communicating a large tax bill to your clients is never easy, but by following these guidelines, you can approach the situation with professionalism, empathy, and clear communication. By doing so, you can help your clients navigate the complexities of their tax situation and ensure they feel supported and well-informed as they move forward.