The warning sign most CPAs miss before a client leaves

Today’s clients are becoming much more educated about tax strategies through podcasts, social media and AI. How is that changing the expectations they’re bringing into meetings with their CPA?

Clients have access to more tax information than ever before, which means they’re coming into meetings more informed and expecting more than tax preparation. They want proactive planning and want to know what strategies are available before they write a large tax check. We see this frequently with short-term rentals. A high-income client may hear that an STR, combined with cost segregation and accelerated depreciation, can potentially create significant tax benefits if they meet the requirements. When they bring that idea to their CPA, they expect them to understand it or at least have a trusted resource who does. CPAs don’t need to be experts in every advanced strategy, but being aware of them and having the right specialists in their network can dramatically increase their value to clients.

Many firm owners assume they’ll know if a client is unhappy, but that’s not always the case. What are some signs that a client may be looking elsewhere because they aren’t receiving enough proactive tax planning?

One of the biggest warning signs is when the client is consistently bringing tax strategies to the CPA instead of the other way around. If they’re asking, “Have you heard of this?” or “Why aren’t we doing this?” they may already be looking outside the relationship for ideas. This is especially important for high-income clients who may be facing six-figure tax liabilities. We’ve seen clients seek us out specifically because they discovered the short-term rental tax strategy and wanted to understand whether it could work for them. Ideally, their CPA introduces that conversation first and then brings in a specialist to help execute the strategy, allowing the CPA to remain at the center of the client relationship.

For firms that want to become more proactive advisors but don’t know where to start, what are a few conversation starters or planning opportunities they should be introducing with clients today?

I think it starts with asking better questions earlier in the year: What will your income look like this year? Are you expecting a large bonus, business distribution or liquidity event? What is your projected tax liability? Are you interested in owning real estate? Those conversations can uncover planning opportunities very quickly. One group CPAs should pay particular attention to is high-income clients with significant projected tax liabilities who are also interested in real estate. They may be candidates for a short-term rental tax strategy. The CPA doesn’t need to source or operate the property; they simply need to recognize the potential opportunity and connect the client with the right resources to evaluate it.

The short-term rental tax strategy is one example of an advanced planning opportunity that many firms overlook. What makes it valuable, and what types of clients should CPAs be evaluating for eligibility?

What makes the short-term rental strategy so interesting is that it combines tax planning with acquiring a real estate asset. When structured correctly and when the taxpayer meets the applicable requirements, an STR combined with cost segregation and accelerated depreciation may generate losses that can offset non-passive income without the taxpayer qualifying as a real estate professional. That can be especially compelling for high-income W-2 earners and business owners with large tax liabilities who also want to build a real estate portfolio. The property still needs to make sense as an investment, and the taxpayer has to satisfy the applicable rules, which is why we focus on helping clients find and operate STRs that make sense from both an investment and tax-strategy perspective while working alongside their CPA.

As AI automates more compliance and tax preparation work, where do you think firms should be investing their time to remain indispensable to clients over the next five years?

I think the biggest opportunity is proactive planning and relationships. The CPA who calls a client in September and says, “Based on where your income is trending, let’s look at some strategies before December 31,” provides a completely different level of value than someone the client primarily hears from during tax season. AI will make information and compliance work increasingly accessible, but understanding the client’s complete financial picture, identifying opportunities and bringing the right specialists to the table will remain incredibly valuable. The best CPAs won’t necessarily become experts in every strategy; they’ll know what opportunities exist and who to call when a strategy like an STR could be a fit.

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