Increase Your Tax Preparation Revenue | Tax Strategies & Preparation Articles

Maximizing Your Customer Base

Published under Growing Your Practice, Helping Your Clients

Turning Those Individual Returns into Business Returns

A couple talks with their tax preparer. Have you ever wondered how you could translate the healthy influx of clients requesting individual tax help into the more profitable service of tax planning and preparation for small businesses? Have there been several candidates for whom you have prepared individual returns, people who could save on taxes if they were to turn their hobby or pastime into a business? Are you only preparing an individual’s tax returns when you could be doing their business’s as well?

Here are a few tips to consider:

Getting the Profit Motive

In order for the hobbyist to become a business owner they must be interested in making a profit. Have them honestly answer the question, “Would I like to make money from my hobby?” If they would, then you are, or rather they are, in business!

The IRS has some guidelines in determining the validity of this type of business. Their main interest is in determining whether the intent of your client’s hobby was to earn a profit. The IRS looks at the following factors to decide if those intentions are honorable:

The manner in which they carry on the activity.
Their expertise and the expertise of their advisers.
The time and effort they expend in carrying out this activity.
The expectation that the assets used in their business may appreciate in value.
Their success in carrying on similar or dissimilar activities.
Their history of income and losses with respect to the activity.
The amount of occasional profits, if any, that are earned.
Their financial status.
The elements of personal pleasure and recreation.

This doesn’t mean that just because an individual enjoys doing their “job” the expenses cannot be deducted. The Tax Court has ruled that “suffering has never been made a prerequisite for deductibility.” It’s just important that there exist evidence that your client is conducting this hobby as a means of producing profit.

Easy Set Up

Often all that needs to be done for a person to set up a business is to file a “DBA” (an assumed name for the business, or “Doing Business As”) with the county or state in which they reside (minimal fees may apply).

Once this has been done, you, as their tax advisor, can look at what possible deductions connected to their pursuit of making, building, providing services, etc. to those around them. Remember, companies don’t have to make a profit, but they must intend to make a profit. Make sure that they can meet that criteria, and then offer them the chance to save them money.

The other way of maximizing your customer base is through those business owners who ask you to prepare their individual returns. Perhaps they don’t know you can also do their business taxes. Maybe they are having a great aunt take care of it and would like some help. They may even be trying to do their business taxes on their own. The key to capturing that account is to ask. Yes, simply ask them how they are taking care of their company’s yearly tax obligations. Once they tell you all that they can about how they are preparing their business taxes you can ask, “Can I help you out and see if we can save you money?”

That one simple question is the best way to gain the business of those with whom you are acquainted. Again when you display a genuine concern for their business, they will be more inclined to let you in their door! Many of our students and graduates have used this tactic to gain account after account on their billing records. You can too.

Let Us Help You Grow Your Clientele

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