Client meltdowns?

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#1
Beagle  
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How often do you get client meltdowns upon hearing their tax owed? What was the worst?

Couple of years ago a client took about $75k out of his retirement to help his son through a divorce and extended unemployment. When I told him what he owed he literally broke down crying in my office. sobbing, hard. It never dawned on him that he'd owe tax on the money. Which of course meant he had to take another distribution to pay the tax.

This year an attorney client decided to go mostly self employed! When I told her the tax bill she had a complete breakdown in the chair. After about 20 minutes she paid me cash, refused to sign the 8879 saying not to efile it / she'd take care of it. Obviously she's not filing. She's a 67 year old attorney and has <$50k saved for retirement after all her retirement plan distributions the last 10 years (she has some home equity but not a ton). This year she took out $25k to pay part of her daughter's wedding and had nothing withheld.

The nice part is neither blamed me at all - 100% courteous to me.
 

#2
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I used these "stories" like a broken record to remind many of my clients that they should call me before making any financial decisions.

In your two cases, I guess all I would do is to be compassionate and help them to figure out if there is any solution or arrangement. And I still remind them to call me before their next big financial decision.
 

#3
JAD  
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That is so sad. The individual stories are so sad. Also sad is what it illustrates about the complete lack of financial literacy of so many. Dare I say most?
 

#4
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I always tell clients and prospects, being self-employed is expensive. We get taxed to death. Charge appropriately. If you were making $100/hr working for someone else, you should charge $200/hr minimum working for yourself, preferably $300/hr. If you can't, stay an employee.
 

#5
Beagle  
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JAD wrote:Also sad is what it illustrates about the complete lack of financial literacy of so many. Dare I say most?


Financial education and spending habits are learned. If your parents didn't manage things properly and educate the kids, it's difficult for them to learn. Not impossible but they need to find a source of quality information. My dad, both grand parents and 3 out of 4 great grandfathers were all self employed. They all looked rather poor - none were poor. 60% of Americans have less than <$2k for an emergency saved.
 

#6
ATSMAN  
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My client threw his cell phone on the floor after his wife refused to increase her withholding. She had claimed so many exemptions that she was withholding a few hundred dollars on a 65K salary. To rub salt into the wound she had 2 1099-C about 10K.

He asked what caused it and I showed them the calculation. On their way out I could hear the wife telling her husband he can leave if he wants, she can do better :twisted:
 

#7
Eduardo  
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Beagle wrote:
JAD wrote:Also sad is what it illustrates about the complete lack of financial literacy of so many. Dare I say most?


Financial education and spending habits are learned. If your parents didn't manage things properly and educate the kids, it's difficult for them to learn. Not impossible but they need to find a source of quality information. My dad, both grand parents and 3 out of 4 great grandfathers were all self employed. They all looked rather poor - none were poor. 60% of Americans have less than <$2k for an emergency saved.


My wife is a teacher, and actually asked me why the government can't pay off the debt by printing more money. Her sister, who is a total grade-A 100% idiot (on top of being a drama queen and a mooch) was notorious for doing dumb stuff that costs her money, then calling us crying that she needs money and will pay us back (thankfully, she has an idiot boyfriend now who has to deal with her). This is the only person that I've ever seen to have two ex-husbands in court at the same time (one for child support, one for divorce). Their dad was a blue collar worker, but seemed to take care of his money (although his daughter also hit him up for money more than once).

Thankfully, I control the money in our house. I'm in the process of inheriting over $450K from my mom, and all of it is being saved and invested. My brother isn't even telling his wife how much we're inheriting as he doesn't want her to start planning on how to spend it.
 

#8
JAD  
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Beagle wrote:Financial education and spending habits are learned. If your parents didn't manage things properly and educate the kids, it's difficult for them to learn. Not impossible but they need to find a source of quality information. My dad, both grand parents and 3 out of 4 great grandfathers were all self employed. They all looked rather poor - none were poor. 60% of Americans have less than <$2k for an emergency saved.


I think we should have financial literacy along side reading and writing. Start young with concepts about saving, charity, etc. When I was young, I got 35 cents a week for an allowance. I had to donate 10 cents - so not so much of a donation, but a mandate. The 25 cents was mine to spend.

Over the years, the students should progress to reconciling bank statements, seeing how credit cards work when you don't pay them off. Then budgeting for the family, how much goes to taxes, etc. We could progress to inflation, the national debt, the differences between budgets families must maintain vs the govt, that can print money, etc etc.
 

#9
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Kids now adays can't understand hardly anything beyond tik tok, Face Book, and video games. Parent's are hardly involved and give their kids smart phones at 4 and 5 years of age. Hard to teach kids financial literacy when parents don't even act like they're interested in their kids. I'm a millennial by definition and can see this sad truth.

Just had a fun phone call with a client telling them they owe 12K which is a lot for their income... Let me know how to make it easier to give these types of phone calls.
 

#10
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warnickcpa wrote:Kids now adays can't understand hardly anything beyond tik tok, Face Book, and video games.


I push back hard on most "kids now adays..." because most times young people are a product of their surroundings. This is no exception, IMO.

Think about the language in our society around "saving" and what you "deserve", which generally comes back to personal responsibility. There are plenty of young people who have been taught how to be responsible and don't have meaningful issues around these topics. Conversely, there are plenty that haven't and do. It's not as much a generational issue as an environmental issue. Every generation complains about the one before it and the one after it. Been going on for millennia. It's not a novel issue.
~Captcook
 

#11
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I try to give the numbers over the phone. By the time they come pick up their return, the shock has worn off.
 

#12
Taxaway  
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At the heart of financial/tax literacy, how many clients love and want a big refund! I've had only a few ask if they should increase their withholding so they could "get more back at the end of the year!" :o Flashback of old HRB days! My current clients, to whom I explain they want to come as close to even as they can or owe a little, first understand the math, then decide, because there is that feel-good effect some may want. As long as they're informed.
 

#13
ATSMAN  
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My wife is a teacher, and actually asked me why the government can't pay off the debt by printing more money.


Actually the US Govt does print money as much as it can while the US Dollar is the reserve currency of the world. Why do you think US got out of the Gold reserve to peg the value of dollar. Read Rand Paul's book.
 

#14
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Great thread.

Lot's of crying in my office, mostly with new clients.

Sometimes I have empathy, like one recently referred client who's 55 year-old husband died and there is not much money to pay the balance on the smallish death benefits and no property ownership. Then she breaks down crying. I gave her a discount ($350 instead of $550 for the simple return) and explained that there will be no future year discounts (in other words, we're not a good match so find another firm, but at least I wasn't cruel and I didn't alienate the referrer). My point is that it's not always their fault, though I suppose she did get the $70,000 in benefits (doesn't go far in Hawaii where lunch is $18 not including a tip).

For others I have no sympathy, especially the one's who ignore WH advice and pay year after year - but are still upset about it.

I definitely see couples fighting and crying over withholding differences, but not as bad as "cell phone throwing man".

My clients, especially self employed, all get the "government is a 1/3 partner in whatever you make" speech. Kind of like MvT's speech, but worded differently.

For shock events, I like to fire a warning shot..."dear bonehead client, I don't have your taxes completed quite yet, but I see that you have $19,500,000 in early distributions here but only WH 10% federal and 0% state, I don't think this will end well, were you expecting a big balance?"

Kids (that can afford me) get tough love from me.
 

#15
CathysTaxes  
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Client didn't have a meltdown but was upset. Last March, you know when we were all quite busy, her impulsive broker was trying to get her to do a Roth conversion. She's in her 60s and retired. Without doing a full tax plan, i suggested at least ten percent from all sources of income. She just bought a house and wanted as much income as possible. She had ten months of social security with no withholding and ended up owing $1800.

For 2021, she set up withholding for SSA but it was midyear and $811 less than if started in January. She would have owed $18. But her broker didn't do withholding on the conversion and she owes over $4000.
Cathy
CathysTaxes
 

#16
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Client ended up owing $12,000 this year. Emails me a laundry list of questions, I do my best to summarize, but they're asking me to find "gray" areas... Not happening!
 

#17
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I've had a couple of minor meltdowns but they also knew it was their fault, so it did not last long. I have one client that is awaiting the bad news; they took a very large distribution from an retirement acct to pay cash for a rental property.

Highest tax liability I recall having to communicate to a client was $450k, but I am going to be having a lot more six figure tax liabilities if some of my clients do not engage me to do planning and actually pay the estimated payments I suggest.

I do not engage in gray area discussions or really have much sympathy. I often comment to every client, at one point or another in the year, that their best option is to simply make less money. And none want to do that.
 

#18
Eduardo  
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warnickcpa wrote:Client ended up owing $12,000 this year. Emails me a laundry list of questions, I do my best to summarize, but they're asking me to find "gray" areas... Not happening!


Had a guy like that - he'd always end up finding new "expenses" for the LLC he was invested in or for his wife's MLM business. Thankfully, I think he's going elsewhere this year.
 

#19
Preppie  
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Last year a client had cashed about $150K in mutual funds to buy a property, but then decided not to buy the property. She turned crimson when I told her she owed tax on the sale of those funds. She started screaming at me that it wasn't income because she never took it out of the brokerage account. She left in a huff to go strangle her broker and do her own research. She came back with her tail between her legs 2 weeks later, signed and paid.

She got the "no room at the inn" this year when she called to schedule her appt.
 

#20
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Preppie wrote:She started screaming at me that it wasn't income because she never took it out of the brokerage account.


We'll I've certainly been doing my own taxes the wrong way. I didn't know only what I take out of my bank accounts is taxable. :)
 

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