Building Financial Literacy and Trust with Small Business Clients

Joey Vrooman, CPA, joins the show today and helps explain the importance of working to educate clients on financial literacy, despite common disinterest. He discusses tactics for simplifying complex terminology, using visual tools, meeting clients at their level, and the "win win" benefits for both advisor and business owner.

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• (00:00) - Federal Tax Updates Episode 21
• (01:11) - Welcome Joey to the show
• (03:02) - Defining financial literacy
• (06:04) - Teaching clients to understand finances
• (16:02) - Understanding client personalities and tailoring communication
• (18:54) - Managing pricing and margins during inflation
• (22:57) - Keeping financial information simple yet accurate
• (27:33) - Answering client questions on financial decisions
• (30:42) - Documentation to protect against liability risks
• (33:48) - Year-end tax planning with clients
• (39:28) - Confusion caused by media coverage and ERTC mills
• (43:32) - Wrap up and remember to subscribe

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https://www.linkedin.com/in/joey-vrooman-cpa-87371568

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Annie Schwab

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The full transcript for this episode is available by clicking on the Transcript tab at the top of this page

All content from this podcast by SmallBizPros, Inc. DBA PADGETT BUSINESS SERVICES is intended for informational purposes only.

Creators & Guests

Host

Annie Schwab, CPA

Franchisee Operations Manager at Padgett Business Services

Host

Roger Harris, EA

President at Padgett Business Services

Guest

Joey Vrooman, CPA

Joey is Padgett Franchisee based out of Bismarck, North Dakota. He has a strong passion for Entrepreneurship and increasing the collective wisdom of Financial Literacy.

What is Federal Tax Updates?

CPAs, Enrolled Agents, and Tax Preparers can keep up-to-date with the latest federal tax information while earning NASBA approved CPE credits and IRS approved CE credits by listening to the bi-weekly Federal Tax Updates podcast. The hosts Roger Harris and Annie Schwab have over 75 years of tax experience between them, which has been featured in various media outlets including Wall Street Journal, USA Today, The Morning Business Report, Bloomberg Business News, and Accounting Today.

Warning: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Roger: Hello everybody. Welcome to another federal tax update podcast. This is Roger Harris. And I'm joined as always by Andy Schwab. Andy how are you doing today?

Annie: I'm doing pretty good. Roger. How about you?

Roger: Not bad. Not bad. Today we are joined as we mentioned, we're going to try to bring some guests in to join Andy and I. And we're happy [00:00:30] to do that again today. And I'll turn it over to Andy in a minute to introduce our guest. And we're going to be talking about some things that if you've been in this profession for any length of time, you've experienced it, you've probably been frustrated by it. The question is, can we do anything about it? So, Annie, why don't you introduce our guest and let's get started.

Annie: Thanks, Roger. Yes, today's topic is actually very interesting. It's the benefits of financial literacy. And we've got one of our franchise owners, Joey Vrooman, joining us today [00:01:00] to talk about his experience with this, his to share some thoughts with us. Joey, go ahead and introduce yourself to the audience.

Joey: Hello everyone. Thank you. Annie. I'm Joey Vroman, I'm from a small town in Miller, South Dakota, about 1500 people. I've always had accounting and my family background. My aunts owned a firm in my hometown for 45 plus years, and my mom actually was a teacher and went over to help her. And then my brother was a CPA as well. So I've been pretty open to it since [00:01:30] I was young. And I went to University of Mary and started my accounting degree and finished it in 2016, then went on and got my master's in CPA shortly after. I've been a CPA six going on seven years, and I own a practice, a Padgett practice here in Bismarck, North Dakota, and I've owned it since 2020. We've got about 400 tax clients and do a lot of monthly accounting and quarterly accounting. And our niche is kind of based in construction and services. [00:02:00]

Annie: That's a.

Roger: Mouthful. Thank you. Yeah that's a lot. Thank you for for joining us today. Yeah. Annie I'm going to let you ask a few questions, but I want to talk about two real world situations that I think defines what we're going to talk about today. And these aren't legal definitions. They are examples that I think we can all recognize where it's there. Sure. The first one is if you run around and ask a taxpayer how much tax did you owe, they're not going to know. They're going to tell you, oh, I didn't know anything. I got a refund. [00:02:30] So that that's the number one thing that we probably hear that shows they really don't understand their tax return. They base it on the end result. Not how much tax do you really owe or how you got there. The other one is actually in the news today or not today. It's been in the news for weeks. And this is not a political comment I'm not endorsing. I'm not doing anything other than to say if you've paid any attention to the trial in New York about the Trump business, one of [00:03:00] the issues, or maybe the biggest issue is the financial statements, according to the government, were overstating the value of assets. And the defense that the Trumps are using is. Well, we didn't we don't understand that stuff. We just do what our accountants tell you. And in fact, I think Don junior was all over the news a couple of days ago standing out front and said, guess what? I trust what my accountants do to do accounting.

Roger: So clearly they're claiming [00:03:30] they just don't know what's going on. They just follow the accountants. Our clients obviously don't know what's going on because they judge their taxes based on their refund or balance due without any comprehension of how they got there. So if it's from the Trump's down to our everyday client, clearly most people don't understand the details of what we do now. Some of that's because they don't want to understand. I get that I've always said that a small business owner got into business to do the one thing they [00:04:00] loved, and the 100 things that they hate, and a lot of what they hate is what we do. But that doesn't excuse them from having to understand their business and the importance of understanding their business, because they make decisions about their business every day without really knowing why. And that can be dangerous. So that's why we've invited Joey to come in and talk and help us understand the the problem it creates. And to the extent that we can solve it, we'll [00:04:30] see if we can solve it. So any with those non political remarks, just real world examples, I'm going to ask you to see if you guys can come up with a better definition than I don't know what it is.

Annie: I understand. And in all honesty it's fantastic that our clients put faith into us and trust us. It's it's great. But having a and I'm not talking about like needing to go to get your [00:05:00] MBA or go back to college or anything, just a basic understanding of how financials work, what these terms mean, what the. Numbers represent, so that they can understand and make decisions that impact their business. Is that what you would say, Joey? How do you how do you define it?

Joey: Yeah, I'd say so. I mean, you got financial literacy, you got literature in the name. So it's really just about reading your financials and how you can actually comprehend it, not only just your business, but you also have to kind of understand [00:05:30] your personal and just boils down to kind of cash flow, making sure your financials make sense and it flows in your cash flow and you kind of understand what's going on.

Roger: Yeah, yeah. And sometimes it's not easy because the cash flow and the tax laws aren't always consistent, you know, particularly without getting too technical. If you're an accrual you know, the other question we always get is if I made $10,000, how come my bank account went backwards. So yes, again, that's a fair question. But you [00:06:00] should know the answer to that.

Annie: Yeah, yeah. So Joey, do you teach your clients like how do you get your clients to better understand, you know, you're delivering financials, you're giving them estimates, you're doing their tax returns. Is there do you have a method to kind of increasing their their knowledge in this area?

Joey: Well, it kind of boils down to really getting a good understanding that we as preparers and people in the industry, every day we get [00:06:30] a growing knowledge, and it's always growing and getting harder and harder to go back to the basics and actually kind of understand where they're coming from. So it's really important to take a step back and see what their level of financial literacy is, and try to coach them to grow that level. I don't think there's a specific method. I mean, everyone's kind of different and learns different, and it's just really knowing the emotional intelligence and financial literacy of the individual you're working with and trying to coach them and help them [00:07:00] grow. And they need to have that mentality as well that they want to actually learn and grow, too.

Annie: Do you get pushback?

Joey: I mean, sometimes, but it's I've learned that it's really tough when you don't push it back on them too, because you can get yourself into predicaments, and it's usually a lot more stressful on your staff and yourself as well. If you don't push stuff back on them.

Roger: How frustrating is it to spend a lot of time learning the rules, learning the laws, trying to do things accurately and [00:07:30] kind of being told, well, I don't really care, just keep me out of trouble. I mean, it's got to be frustrating because it's not your business, but you sometimes seem to care more about it than than they do.

Joey: It kind of goes back to the point, too, that you made earlier about the not understanding like refund versus what you actual total tax was, because I don't know how many clients I have that come to me and kind of be like, this person made 60 grand and I made 60 grand, but they're getting a refund and I oh, why is that?

Roger: Yeah. Yeah.

Joey: It's [00:08:00] like, I don't know, it's hard, but you just kind of got to try to teach as best you can to get them on an understanding level. Yeah.

Roger: I mean, that's a hard question to answer because in their world everything's equal. We both made 60. We should both owe the same. But one could be married. One could be single. One could own a home. One could take standard deduction. One could have kids, one couldn't. And they want to know the answer. But they don't appear to want to know why.

Annie: That's true. And it's really hard because I bet you get these questions [00:08:30] and it's after the year end, right? You know, well, why did I do this? How come it was higher than last year? Why is my refund lower than than last year? And while once December 31st kind of passes, there's only so much you can do to change that tax situation. So are you trying to guide them throughout the year, or how do you reach out.

Joey: And say, there was quite a few clients that we had that ended up owing that? I mean, they just had w-2s and other stuff, so they don't [00:09:00] have much going on. But that change with the W-4 has caught so many people off guard, and it's really kind of trying to sit there. And I mean, wait, it's probably June when you actually have time to sit down with them. So they're still back six months on trying to catch up, but it's coming up with a plan and then helping tell them why it changed, like the exemptions being gone and why that filing zeros doesn't really mean anything when that's kind of been the standard norm of people's understanding for the w4's. So yeah, sitting there and trying to [00:09:30] calculate that and say, yeah, we're going to try to catch up as much as we can to the end of this year. So you don't owe as much or maybe you don't owe. And then next year we readjust it again. So you get that monthly amount back in your pocket.

Annie: And then you just keep working with them. I'm guessing this is a not a one tax season, not a one year process. But you keep adding on, you know, over time to grow their knowledge. Is that kind of what you see.

Joey: And it gets to the point where you try to walk them through the W-4 as [00:10:00] you're doing it, and maybe they don't retain it all and you have to help them again. But hopefully given time, they end up actually. Who in their own w4's and understanding it fairly well. And then you're back to the basics of them getting a refund with what they have. Yeah.

Annie: Well, and then financial statements, I mean, you've got the balance sheet and the income statement and my guess is you present it and they go look at the very last line to see what it says. And they never really look through it. Do you. What do you what do you experience with your clients and actual financials? [00:10:30]

Joey: The scary thing is, I think the norm isn't really the bottom line that people look. I think too many people focus on that top line. They focus on the gross revenue, how much money they're making, and that's really their drive to success. And I mean, that's it's a scary thing to get into. Um, but it's really trying to boil it down that your gross revenue doesn't matter. It's really what you bring in net. And you got to understand your allocations, your business, because every [00:11:00] business is different.

Annie: That's true. But you said.

Roger: You had to do things in a relatively simple way because, gosh, if you went back to what we learned in school, accounting can get very detailed, very confusing to the average person. So we're talking about statements where we have tried to kind of get to the heart of what's important. You know, where, you know, to your point, sales matter, but so does cost of sales. So does, you know, depending on the business wages or cost of goods, one of those two is [00:11:30] going to be more important than the other based on the kind of business you are. So we're trying to present them with relatively simple, gosh only knows what would happen if we went back and tried to do accounting the way a public company presents it to their shareholders, and all the terms that make sense to people like us but don't make sense to anybody else. And then so it's hard. So how do you I mean, is it better to do it in real time? Joey I'm talking about how you educate your people [00:12:00] like a W-4 is a real time problem. It's happening in real time. So you're working with them as opposed to trying to be proactive and maybe talking to somebody about a W-4 when right now they're looking at you and go, oh, what is that? I don't need it right now. So are you trying to do it in real time when the problems come up? Or are you trying to do some education in advance of a problem coming up? Maybe the best way I can think to say it.

Joey: So I think real time but also kind of pre-planning. So I mean, you should have [00:12:30] your monthly clients and your quarterly clients. You should have your year end tax meeting. I think on top of that year in tax meeting, you should actually help them like kind of talk through their goals and get an understanding of where they want to be to where you have a document that shows here's their goals, and then you can actually kind of help them hold accountable. Like, hey, you said you wanted this goal. Um, this is where your profits are at. You're kind of missing or you're on target. I'm just kind of help educate them. Like you make goals and when they make their goals and you kind of lay it out for them in their budget or [00:13:00] whatever, they then are able to understand their allocations more because they have to take the focus in planning it, by them taking the focus to plan it, and then actually seeing how it comes out is a way to kind of educate them.

Annie: I like it. You have a landscaping company. I believe that you did a massive spreadsheet. You built it. Is that right? Tell us about that client. Yep.

Joey: Um, so me and him, we've met pretty much [00:13:30] every week for about four months, I would say. And we kind of talked about business goals. I mean, you don't do that for everyone. There's kind of some a fun project and we just talk about business goals, a lot of strategies on where he wants to be. He has pretty ambitious growth goals. And through all these talks, just making notes and documenting and figuring out a way to build it all out and one big like dashboard or report that aligns with all the philosophies, aligns with how he can actually attain this five year goal. And just every month, being able to update it [00:14:00] and track it and see how we are doing, it's it's a pretty, pretty cool project. I'm really happy that we got that done. And he's pretty appreciative.

Joey: To have you.

Annie: Seen his knowledge grow through this? Because seeing a visual is sometimes really eye opening for clients. You can talk, talk, talk, but if you actually do like a visual of, you know, a flow chart or a comparison chart or something like that, sometimes I feel like that hits home with clients, like just.

Joey: Yeah.

Joey: And when you get into studying like that, analytics and stuff like that, you [00:14:30] do learn like the personalities of people and there's like 4 or 5 different levels of personalities that you got to try to tailor your reports to, to be able to make sense of them. Some people like visual, some people like numbers. It's just really trying to figure out what that type of person is or like, do they like to drill down into the numbers? So do they like that pivot table and then double click it to where they actually see the detail to that total? Or are they more macro approach? A lot of people are kind of different. You just sitting down and having those meetings and getting an understanding of their personality. [00:15:00]

Annie: So that sounds like a lot of time, face to face time with your clients. I'm guessing that there's probably industry journals, different ways that you reach out to them and get them to kind of dig deeper into their business. Have you seen like or have you participated or done any sort of advertising or promotional stuff for clients? I think landscaping or construction probably is. Is your niche? [00:15:30]

Joey: So I think that's why it's really important to have a niche, because when you have a niche and your specific industry and your specific fields, you see a lot more information tied to that niche and where people are going and what costs are to where you provide more value to them to actually understand their cost. And the nice thing is, there's so much big data out there right now and data analytics where businesses can access that stuff and they can get that data. Um, [00:16:00] I know ADP offers industry average data reports, and they're just a bunch of software companies out there that you can actually access and try to get that data for your clients or lead them in the right way.

Annie: And I guess, you know, talking tax codes and, you know, debits and credits and all kinds of ratios and stuff, probably not the language they're speaking. But if you, you know, I guess as you form a niche, you begin to speak their language, so to say, which then, you know, the [00:16:30] relationship gets stronger, you know, you can sort of understand their their pain points. And of course, understanding their goals is always important too.

Joey: Absolutely.

Roger: I'm going to bring up something. I'm probably older than the two of you combined. So I've seen this happen twice. One thing I've noticed when it comes to really critical mistakes you can make by not understanding the basics happens in times of inflation, [00:17:00] which we're in again. Back in the 70s, we had it even worse. I remember someone once saying, keep your credit cards handy because the 17.5% interest on your credit card was cheaper than anything you could get at the bank, so that's how bad it was. But understanding how to manage inflation and pricing in a inflationary world can sometimes be confusing and really critical to the success of a business. So if pre inflation, [00:17:30] a product costs you $5 and you sold it for 750, you were making $2.50. I'm not smart enough to do the math in my head as to what percentage that is, but when that product goes from $5 to $6, if you want to maintain the margin, you can't just raise it to 50, because that was what your old margin is. You have to raise it more than that to accomplish for the margin that you were trying to get. So what happens is you see margin [00:18:00] creep for people who do not understand that in inflation times, it's not maintaining the same $2.50. It's maintaining the margin that your business is supposed to have for the products or services that you're providing. So, Joey, have you seen that kind of problem for I'm sure a lot of people are talking about inflation and the props, the difficulties that's causing on their. They're companies.

Joey: Yeah, I agree. I mean, you [00:18:30] look at restaurants, for instance, I mean, you can go to McDonald's now and you get a job for 17 an hour around here. And that's pretty crazy jump from the inflation cost. And then now you've got to hire servers and manage the tips and also manage the food costs and the increase in that and all the farmers have been going through. I think that's a very great point to make. And another thing too is you see the menus with like a lot of people from COVID kind of going to DoorDash and things like that, and understand that you actually have to pay more for this. So you have to raise [00:19:00] your prices specifically for online orders. I do, I do see that where you do need to be understanding your financials and know where you're going and not be stuck with, um, getting lucky, like you said earlier.

Roger: Yeah, sometime because you made the point earlier. You know, sometimes doing a budget or having a target or industry standards, whatever those matter. And if it says that your margin on the product you're selling should be 50% and your wage cost should be 20%, [00:19:30] it's important that you continue to maintain those even in inflationary times. If you have to pay more for the product or pay more for the people, if you eat into those margins, then it's coming out of your pocket, coming out of your bottom line. Now, competition. Sometimes, you know, we can't always get everything we want from a pricing standpoint because sadly, we're competing, perhaps with that person down the street that doesn't understand this, they're not going to last long. But [00:20:00] for some period of time they could put a pressure on us to not raise pricing. But I think that's a, you know, in day to day activities of running a business, particularly in inflationary times, understanding that those margins that are there are there for a reason. And you need to understand how they're impacted by. To your point, Joey, I focused on the cost of the product, but gosh, the cost of hiring people now has gone up dramatically. We just see [00:20:30] I think all three of the automakers just settled their strikes. So guess what's going to happen to the price of cars? You know, Ford is not going to sell the car for the same price when they promised 25% increases to their employees. Yeah, our clients have to think the same way and operate the same way, even if it's uncomfortable.

Annie: And, Joey, I know you have these wonderful relationships with with your clients and and the the more you're in front of them and educating [00:21:00] them, the easier your job becomes. But there are definitely some, let's say, topics that I feel like our clients struggle with, like making estimated tax payments, the whole idea of withholdings versus estimated tax payments, and when you have to pay them and how much you should pay in and there's there's and two different philosophies too. You can have a client who just wants to give the IRS enough money to avoid penalties and interest, but they don't [00:21:30] want to, you know, prepay. And then there's some that are so afraid of owing money that they want to make sure they're sending in enough or withholding enough. So, I mean, I think that's just one example of, you know, understanding what withholdings and estimated taxes. Is there another one that maybe you're familiar with, that you deal with your clients, that you're constantly having to talk to them about?

Joey: I think I think the estimated tax payments is a pretty good hit there. And it's [00:22:00] just another example of really needing I mean, Google doesn't help all CPAs because everyone has their own individual examples to go by because everyone's kind of different personalities and wants different things. And as a CPA, it's our job to be emotionally intelligent with that client to help them get to where they are, educate them on those penalties that they'll be paying or if they don't. Um, so I think those are great examples there. I think I think it's just another example of the personal differences, um, [00:22:30] for each client that you have to face.

Roger: Given some of the challenges that we're talking about here today, kind of talk about your philosophy in terms of dumbing, dumbing down sounds like you're doing something wrong. So I'm not sure that's the right term, but keeping keeping things simple for clients, keeping them accurate, keeping them in compliance, speaking to them in a language they understand, but keeping things simple [00:23:00] as opposed to trying to show them how smart we are. Because I can make the best journal entry anybody's ever made, or I can. I can quote you a code section, talk about just the philosophy of of how you try to structure your conversations and your accounting to, to fit what is obviously, in today's world, a client base who for the most part doesn't really care about a lot of what we do. Do they care about the end results? Like we said, what's my refund? You know, talk about how [00:23:30] it's had to change or made you think about how you deal with your customers in light of all that.

Joey: So I'd say the first example is kind of looking at your tax returns. They have a pretty amazing import in the background that two year comparison. Yeah. And just back working that two year comparison to say like hey yeah this makes sense. You had this much income. Your cash went like back working into their cash change. Right. To make sense to them. Like, hey, you paid down these liabilities. You paid yourself these distributions. And here's some pretty big excessive costs you had or like back working it to them [00:24:00] to understand their cash difference. Because a lot of businesses, when they start, they focus on their bank statement and just their cash and like cash increase, cash decrease to tell how they're doing. Like you kind of stated earlier, I think that is one way to dumb it down. And like you said, just not speaking on tax codes or why they owe this or the credits change, it's just kind of like. Trying to simplify it. Simplification is kind of the best approach.

Joey: So I.

Joey: Think working back to their.

Joey: Language.

Annie: So that question [00:24:30] how much can I spend? How much can I spend and still have enough in the bank to pay my bills, pay my credit card statements? You know, I feel like like you have a crystal ball or something, right? They come to you. Well, how much can I spend? You know, how do I raise capital? You know, how do I get money? How do I you know what? When should I do these, take these deductions for these payments. And I mean, some of it's basic knowledge, but some of it gets [00:25:00] kind of involved and complex.

Joey: And it all takes time because I mean, this time of the year especially, you get all those emails like, hey, how much equipment can I buy? Or hey, can I buy this? Should I buy this this year or next year? And it's like, we got to sit down and have a meeting because everyone's situation, situation is different, and we have to kind of take time to calculate that and really understand your marginal tax rate or what you're paying, or if you're an s-corp or if you're going to be an s-corp next year and avoiding that self-employment tax. There's just a lot of you [00:25:30] have to sit down and you have to meet and you have to talk to them. That's kind of what it boils down every time, almost. And I would.

Annie: Assume your clients are they probably want that. They they want to come and sit down or are they just oh, just tell me. Just tell me the answer. Tell me what to do. Or they enjoy the conversation. I feel like it just sort of depends. But what do you see?

Joey: It's just like you lay it back on. If they don't want to meet with you, it's like, well, the information I can give you is based on what you give me. So the value of it depends on what you give me. So it's best to have a meeting [00:26:00] and just sit down and take 45 minutes to an hour and just really go through things and be very exact to what the examples are estimating for them.

Roger: Yeah. Joey, I want to I'm sure you've had this happen to you. One of the things that frustrates has frustrated me for many years of doing this, and I'm sure it's happened to you, is despite all the time you spend trying to learn this and study this and all this sort of stuff to to learn in a meeting that your clients Barber knew more [00:26:30] than you did because they told their barber while they were getting their haircut, told them they could do something, so they immediately come to you believing the barber is smarter than you are. And unfortunately, these people are hearing things and getting some of this education from people who have no idea what they're talking about. And I'm amazed how many times, despite your background and the years you've put into it, that you find yourself arguing with the client's barber over something [00:27:00] that happens.

Joey: Actually, I had that example happen this last week where someone kind of came in and was discussing was like, hey, yeah, this neighbor over here bought this land and they bought this tractor on it, and they're getting all these write offs and stuff, and it's like, that's passive land rent because you're not really doing anything on it anyways. And your passive losses are like limited. So it's just you do deal with that a lot and it can be tough. And now with technology you have Google and all the research there and like they don't see it [00:27:30] all, but they think Google tells all.

Roger: And they hear what they want to hear. I mean, if somebody tells me, well, if you go do this, you'll save. It's kind of like the employee retention. I was just.

Joey: About to say.

Roger: Without it, we couldn't go thing, you.

Joey: Know, I was.

Roger: Hear from somebody, you can get half $1 million by doing this. Well, no you can't, but hey, somebody told them so it must be right.

Annie: Or my neighbor or my friend, or this person or that person. If they can do it, why can't I do it? You know they can get it. Why can't I get it? So [00:28:00] put yourself in a bind.

Roger: Yeah. And we're trying as best we can to, to your point to keep it simple but. And make it practical happening in real time. But whether they are consciously doing it or not. And it's particularly bad if they, you know, they come to you and get their taxes and they owe much more than they expect, they're going to tell everybody they run into how bad their taxes were and they're missing. They run into, well, I didn't have to pay any. Well how not? Well, I did this. Why. And this. And it's like, [00:28:30] well, you can't do that. Or you know, it's one of those things it says, well, go let your neighbor do your taxes. Then they sound like a genius. So go let them try it though they didn't do it themselves or who knows what. So yeah, this whole idea of literacy is a big part of how we deal with our client communications. And the relationship that we build is how literate are they? How literate do they want to be? How much do they want to know? How much do they have to know? And and [00:29:00] how do we communicate with them in such a way that they know enough to be successful in business? Because that's ultimately our goal is to help them be successful, profitable. If they.

Joey: Fail sustainable.

Roger: We lose a client. So we want them to be successful, but we can't force them to learn.

Joey: I guess to go on farther in that if they don't want to learn and they don't force, or if they don't want to learn and take the. For time to learn. When does that make them a decline?

Joey: Yeah, yeah, yeah.

Annie: Because there's only so many times you can [00:29:30] encourage or recommend. I mean, everybody wants to be profitable, be sustainable, you know, work life balance, you know, all all of the above. But they it doesn't come free. It's it's you have to work at it. And working at it means having a really deep understanding of the ins and outs of your business, whether you're budgeting or doing projections or comparisons like your dashboard you were talking [00:30:00] about, you know, making making it visual, you know, having that client part of the discussion, part of the data, part of the understanding of what what you're presenting, you know, have them invest in it and and they'll probably get more out of it. But you have to be willing to do the work.

Joey: And I mean, it's not only them getting out of it, getting stuff out of it, too. You're actually learning a lot at the same time, learning more of their processes and their philosophies. And maybe they make points that you [00:30:30] don't even know. Yeah. And it's just a good visual to have from their perspective. So I think the more we interact with our clients and the more we have clients that want to grow and discuss these things, the more we can learn as preparers and be more beneficial to all of our clients. Yeah.

Roger: And sometimes, and maybe I don't know that we think about this enough. Sometimes a lack of understanding from a client and ignoring our advice can create some potential risky liabilities in the future. When we talk to [00:31:00] them, they come to us with some idea, something they want to do, and they ask us for our advice. Then they go off and do something completely different. And the results that come back are negative, and they don't remember our conversation or don't remember what we told them. So one of the things that I think we all have to to deal with when we have clients like that is making sure from a liability standpoint, we document our discussions, we document our [00:31:30] attempts to to answer their questions and educate them, because you know that the next person they talk to that tells them something they like better may have greater influence over them than we do. But when the results come back, who are they going to blame? Not the guy next to that they talk to after us. They're going to come back to us. And why didn't you tell me? Why didn't you do? Well, I did, but you don't remember. So lack of financial literacy, particularly for clients [00:32:00] who are handling a lot of money, can present risks to us. And one of the things that I think we all have to recognize is in those instances, it's important that we document our conversations. We can go back and show that, yes, I told you the rules of a like kind exchange. It's not just you sold something and decided 12 months later to buy something else and run in here and say, I don't have to pay any tax, do I?

Joey: Yeah, right.

Annie: That's that's a good point.

Joey: And I think documentation is very important with financial literacy [00:32:30] in general too, because you're going to have these discussions with them. And if you're trying to coach and teach them, you need trust. And if something happens that's different from what they received from your meeting or thought they received can confuse them. So when you have that confusion and sit down, it's nice to have those documented notes. Like for us, we literally put a date on our pages and we take all our notes, and then we scan it in to a folder so we can always resource it. Then you can kind of say, hey, this is exactly what we talked about, have it all in writing here, and this [00:33:00] is why it's different. And then they don't get as confused. So they'll keep learning and growing and not lose your trust.

Joey: Right.

Annie: Good suggestion. So we're kind of getting close to year end. So are you just what's your strategy for getting in front of clients, reaching out to them before the end of the year? Do you spend most of this time of year in meetings or emails or one on ones, or what is your kind of say?

Joey: It's a it's a lot of emails and meetings. I [00:33:30] try to go through our business clients and make sure all our monthly quarterly clients have at least one tax planning meeting here to kind of go through that. And then also just going through the tax list. And I mean, there's big data out there. So you can actually export data out there of like how much people owe and stuff and make sure you work your way down to the people that owed quite a bit and at least hit all those and just try your best to have the meetings. I mean, it's pretty much a mini tax season for us, and the more prepared we are and the more we talk to our clients, the more likely the tax preparing process. Next [00:34:00] January is going to be a lot smoother.

Annie: That's a good point. If you can get get in front of them before busy season, answer their questions. Then when busy season comes, it's not so many phone calls, so many extra meetings. Explanation if you can sort of, you know, give them a heads up now and then crank them out sort of in April. That's a good point.

Roger: So, Jerry, how long do you think it's going to be before instead of arguing with Google, you're you're arguing with I.

Joey: Mean, [00:34:30] being already kind of has that there. When you search in the being menu, it literally will just sort everything and type it out as you watch it. Right?

Joey: I've seen.

Joey: It. It's.

Roger: Yeah. But people have to realize what you put in is important to what you got out. So what you say to me, unless you said the exact same things to ChatGPT wherever you went, doesn't mean that my answer is wrong. It may just mean that the word people don't understand. A word can be very important in the [00:35:00] answer you get. You know? You know, what is it you know, required versus suggested, you know, or things like that. So but I is just going to make this sometimes difficult because everybody's on their phone is going to be able to ask a question and get an answer, and they'll figure out how to answer the question to get the answer they want.

Annie: They want.

Joey: Exactly. Yeah.

Roger: And then they'll come to you and say, but look, I says, I can do this.

Joey: And the worst part is the exclusion. Just look [00:35:30] at like the two year use of home and like how many exclusions are really on the bottom there. And people just think, I mean, the tests are confusing. Just for instance, like you have one, it says you can't use it twice in within five years, but then it says the partial exclusion. If you do qualify for some type of event or something, you technically can use it twice within five years. Yeah. So it's really like like Google will never be able to say that to our clients. No.

Joey: Yeah.

Annie: But then you don't want to send [00:36:00] them to the IRS publication either because, you know, that's 14 pages of stuff they don't understand. So there's got to be some neutral ground there where you, you know, and I guess that's where we come in. We come in to, to break the bad news and explain why things are the way they are.

Roger: Yeah. And the media always trust. Oh, the media is great. You know, new tax bill comes out and an article comes and basically tells you half of what the law really says. [00:36:30] But they hear it on TV, they read it in the newspaper. So they run to us and say, look, I can do this. Well, the media doesn't. First of all, they're not qualified in most cases to to dig into it. But, you know, sometimes we're fighting against the media. It's kind of like, you know, sometimes they're worse than the barber because at least they have some credibility if they put something in there.

Annie: But well, back to IRC was all over the news, all over email. Everybody's getting money.

Joey: So same. [00:37:00]

Annie: Same kind of kind of theory. Did you do a lot of the IRC? We are always talking about IRC. Did you have.

Joey: Yeah we we did about 13 of them and they, they were pretty good. And now we're dealing we have clients that come on that we see the IRC. And that's another thing we got to tackle is how do they actually qualify and whatnot. And I did have an example recently that they didn't qualify. They haven't received the money. And then now we're trying to withdraw it and basically put it back on the IRC company and say, hey, just withdraw [00:37:30] these. And now they're trying to charge money per quarter to have them do it.

Annie: Oh yes.

Roger: Yeah. So we charge you to do it wrong. Now that you've figured it out, we're going to charge you to remove it. That's a pretty good game if you can get away with it, I guess.

Joey: Well, at least.

Annie: They're IRC mills still. You know, a place you can find them. Some of these mills have disappeared and moved on and closed shop and all of the above. And I cannot even imagine the the, the literacy, the teaching of the IRC. The IRC was [00:38:00] very complicated. And that's just another example of how detailed can you get with your clients to explain whether they qualify and how the calculations work? Because, I mean, it's complex, but yet the mills make it look so easy to do, right?

Joey: Yeah, and that's kind of one example actually just one off example, because how many CPA firms himself just said, I do not want to touch that. And I'm sorry you can find someone else to do it.

Joey: That happened to. [00:38:30]

Roger: I'm going to use one example and we can wrap up soon because we've covered IRC. We had no, no, we're good can wrap up. But but I had one of the few clients I still work with on a regular basis. When this all started, we went through all the paperwork and came up with how much, and then we sent it in and for like, I don't know, six months every time I'd see them. When am I going to get my money? When am I going to get my money? So they finally got their money, and then about six months later, they got contacted [00:39:00] by one of the mills. And he called me up and said, hey, I just heard about this. Do I qualify? And I looked at him and I didn't look at him. He's on the phone. I said, you already got it. You know, you asked me every day, when would you get it? Where's my money? And now some Mil calls you. That's about as illiterate about as I can imagine. About what? You already got the money. There's not a second [00:39:30] wave of this money. So they hear what they want to hear when they want to hear it. And we're supposed to somehow make them happy when you go, I can't get it for you. You want more than once. Maybe they can.

Joey: That's just another example of the outside parties adding more confusion to our clients, too, because I know there's emails that came across my email saying, hey, this state grant is here, 26,000 per employee. I'm like, That's not [00:40:00] a state grant. No.

Roger: There is no state. No. They did. I think they did it in every state. I remember seeing things with our governor's picture on it, that he just created some new $26,000 a year, or $26,000 credit per employee.

Joey: Oh, man.

Roger: Yeah, we we have to try to do the best we can, and we have to kind of fight off the outside noise at times.

Joey: Yeah.

Roger: Joey, any final thing that you would like to, you know, to [00:40:30] say? I mean, again, we're talking to practitioners. Any last advice you would give to other practitioners on how they we all deal with it. I mean, everybody in this business is dealing with this problem. So from your perspective, anything you would, would suggest or advice you would give.

Joey: I mean, I think it all boils down to taking time and getting know, the clients like we talked about so many times and resource backers, everyone has different examples, and we just have to make sure we [00:41:00] take time to be knowledgeable. I mean, obviously it's billable time and you learn as much from them as they learn from you too. So you just got to go in and have a learning mentality and have clients that have a learning mentality as well.

Joey: Yeah, no.

Annie: This was fun. I enjoyed talking to you. Joey, I thank you so much for joining us. I think it's a very, like Roger said, a very important topic, probably one that doesn't get enough attention. And, you know, as we move forward, there's always going to be a reason to be talking with, meeting with, discussing [00:41:30] your client's business. And all that does is build relationships, builds trust. And it's really a win win. Like you said, it's a win win for the client and and for you. So thank you so much for joining us. And I think that's it. Roger, do you want to do our general closing here and.

Joey: Yeah.

Roger: Again Joey, thank you so much for taking time. Joining us today, Andy, thank you, as always. Thank to all of the listeners listening to our podcast today. Again, send us your suggestions [00:42:00] and comments and we will come back soon. We've got some more guests lined up, and you'll get me and Andy, and we'll try to get through one without talking about the IRC. We just don't know when that'll be or what year that'll be exactly. But again, thanks, Joey. Thanks, Andy. Thanks for listening. We'll be back soon with another federal update podcast.