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What I did on my summer vacation — and how it can help build your business.
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Tax Planning Lessons from the Montana Badlands

Last week, I went to Montana with a group of friends to hunt for dinosaur bones. (Think of it as City Slickers, but with a paleontologist instead of Jack Palance.) We spent the first two days on a ranch near the town of Jordan, which was a blistering 106 degrees when we left, and the rest of our time on a much cooler ranch further west near Glacier National Park. (Spectacular!) While we didn’t find the live dinosaurs I was hoping for (I’ve seen Jurassic Park; I know “life finds a way”), we came home with some fun souvenirs and great memories.

Fossil hunting, at least at our level, doesn’t involve much digging. It’s an exercise in pattern recognition – scanning the surface for something that looks out of place and taking a closer look to see if it’s worth picking up. We looked mainly for patterns (if something looks unnaturally straight or smooth, it might be more than just a random rock), color (if something looks jet black and smooth, it could be a fossilized dinosaur egg), and texture (if something sticks to your teeth, that could indicate biology rather than mere geology). The bones are hiding in plain sight. You just have to be looking for them. (Can you spot the dino bones below?)

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I was surprised and delighted at how quickly I learned to pick up the new patterns. Our paleontologist, Dr. Ashley Poust, is a longtime Montana fossil veteran who first identified and named Wulong bohaiensis, a bird-sized relative of velociraptors that lived in China 120 million years ago. (Seriously, how cool is that?!) He was patient and generous in answering my millions of questions and really helped me understand how to spot the subtle clues separating mere rocks from fossil evidence of life.

Fossils may not have much to do with tax planning. But the same process we use to identify promising finds in the field works to help you spot planning opportunities for your clients. It all comes down to pattern recognition. Except, in your case, you’ll be doing it with tax returns and financial statements.

Let’s say you’ve sat down with a prospective client – a business owner who feels like he’s not getting any real help from his current accountant. What sort of patterns will you look for in his returns? You’ll see if he has children. But are you looking to see if you can shift income off of his return and on to theirs? You’ll notice his choice of business entity. But will you be looking to see if perhaps he’s paying too much employment tax? When you look at his investment statement, you’ll discover if he has retail mutual funds. But will you match them up to his Schedule D to see if they’re creating unnecessary tax bills with capital gain distributions?

It’s not enough to just see what’s there. You have to be looking for the shapes, colors, and textures that indicate there’s something justifying a closer look. Finding dinosaurs isn’t hard if you’re actively looking. Finding tax savings works the same way.

The next step is crucial, too. You have to claim credit for your find, even if there are no naming rights involved. What good is spotting an opportunity if you don’t communicate it to your client? This is where most tax pros fall down on the job.

Here’s a challenge question for you. Think about how many clients you know with Schedule C or Schedule E income and children. Now think about how many times you’ve sat down with them to discuss hiring those children to work in those activities. What’s your percentage? 25%? 50%? 75%? 100%? I’m going to say if it’s under 90% – yes, 90% – you’re falling down on the job.

The kids don’t have to be old enough to work for the business. The clients don’t have to show any interest in hiring the kids. The passive loss rules might not even let them deduct the wages they pay! None of that matters right now. It’s about training your eye to look for the right patterns and claiming credit for recognizing them when you find them. Don’t get bogged down in the weeds, and you’ll find it’s easy to be a hero – even if it’s not as cool as discovering dinosaurs!

Edward Lyon

Edward Lyon

Edward A. Lyon is CEO of the Tax Master Network, where he's coached tax professionals to add planning and financial services to their business since 2005. Go here to join the network. Go here to upgrade your membership or discuss opportunities in financial services.
Edward Lyon

Edward Lyon

Edward A. Lyon is CEO of the Tax Master Network, where he's coached tax professionals to add planning and financial services to their business since 2005. Go here to join the network. Go here to upgrade your membership or discuss opportunities in financial services.

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