324: Year-End Tax Letter: A Simple System That Saves Your Clients (and You) Time

If you want to reclaim your time and stop feeling like your business is running you instead of the other way around to feel like you're working proactively instead of reactively in your business, you are not alone. So many advisors reach that point where business is going well, referrals are coming in, clients are happy, but behind the scenes, it's a little chaotic. You're playing catch-up, maybe you're winging it, or constantly reinventing the wheel. That is exactly why I created the Systems to Scale Group Coaching Program, a 10-month experience designed to help you take control of your business and finally build those backend systems that make everything run smoother. We focus on the actual processes that move the needle from onboarding to client service models to calendar design to the start to finish financial planning and so much more. You'll get a mix of live coaching, pre-recorded modules, office hours, small group masterminds, and a big old dose of accountability. It's for advisors who are ambitious, who have a vision for their firm, and are tired of being stuck in overwhelm. So whether you're further along and just need to clean things up, or you're still getting established and want to build your business the smart way, this program is for you. Our next cohort kicks off January 15th and registration just opened up. Come as you are, leave as a well-oiled machine. Get the details over at theefficientadvisor.com whore in the show notes. My name is Jessica Cole, and I just finished the Efficient Advisors Systems to Scale Group Coaching Program. I run Synergy Wealth Partners in Marlborough, Massachusetts, and I came to Libby Drowning. We were taking on more clients through referrals than we could handle with an understaffed team. Libby helped us step back and clarify the vision of our firm and our ICAs. Being clear on those led us to tailor our processes to the clients we want to service and not get bogged down with things our clients don't actually care about. We are still a work in progress, but we wouldn't have gotten where we are without Libby. If you feel bogged down, you need to sign up for this program. You won't regret it. Welcome back to another Efficient Friday. Every week in 10 minutes or less, I want to share a super tactical tip, idea, process, hack, or whatever with you that you can implement in your business right away. I hope you're enjoying this format and I look forward to delivering super fast tips and tricks with you. You can also watch this Efficient Friday as a video over on the Efficient Advisors YouTube channel. And normally my audio is not this bad, but I am living out the do it messy and make it fancy later mantra that I share all of the time. I've been doing a ton of traveling and needed to get some of the podcast recordings done on the road, and guess who forgot their microphone. So I'm using my iPhone, so if this is your first time listening, my apologies. It's not normally this audio unfriendly. But I, as always, am your host of the Efficient Advisor, Libby Graywee. I built a 100% referral only planning practice that I grew to seven figures as a solo advisor all while working just three days a week and taking off 14 weeks a year to lean into being a mom, a wife, a friend, a daughter, a sister, and frankly, a travel obsessed human. I'm here to walk alongside you and to show you how to do the exact same and to help you take immediate action on the most important strategies for scaling, organizing, and creating less stress and overwhelm in your business. We are about to transform your practice. So move over exhaustion and get out of the way, Advisor ADD. It is time to take that one right next step to build a business and a life that you love. And before we jump in, I want to share a quick message for you. Right? You know what it looks like. You've finished an amazing client meeting and you feel so great about how it went. Then you remember you've got an hour of follow-up work waiting for you. CRM updates, emails, task lists, delegation, all of it. What if I told you there's actually a way to eliminate all of that? Quinn, an A.I. assistant built for advisors, automatically takes meeting notes, drafts, follow-up emails, handles CRM data entry, and schedules reminders. It gives you back at least 15 to 20 hours every week. You can even talk to Quinn while driving and have it handle administrative tasks for you. It's finally like having that a dream assistant we all talk about wanting. You can check them out over at heyquinn.io/efficientadvisor. That's heyquinn spelled with a Q-U-I-N.io/efficientadvisor. Or you can check out the link in the show notes below. Trust me, you'll wonder how you ever managed without it. Okay, today I want to give you a super tactical idea that you can just steal and deploy in your business. A year-end tax letter that you can send to clients come January or February that helps them consolidate everything their CPA will need. And it clearly shows the value that you're bringing as their advisor. There's nothing worse than you doing all kinds of work to create tax efficiencies for your clients and then not actually getting the benefits of that planning because they didn't communicate it properly to their tax preparer. Think of this as your tax season stress reducer for your clients, for your CPAs, and honestly for you and your business. It's also a huge value add to your clients and a reminder of how much value you bring to the table all year long. So let's talk about what could be in your year-end tax letter. You don't need all of this. And remember, I trust you. I trust you to do it as best for your ideal client. What your client needs is different than what my clients needed. This is just a list of possibilities to get your creative juices flowing. And at the end, I'll share a process to make this an easier lift come tax season. So remember, every time we do something in our business, we want to think about what is our ideal client feeling coming into this and what do we want them to be feeling at the end. So we want to build our letter to move them across the invisible bridge of what they're feeling coming into tax season and where we would like them to be. So I would suggest opening your letter with something like, "Hey everyone, it's your favorite time of year tax season," said no one ever. But we are here to help make this as easy and as smooth and painless as possible for you and your tax professional. This letter is your one page roadmap for what to do, what to gather, and what happened in your accounts at XYZ Financial this year. So right away, you're framing this as a value add for your clients and as a partnership with our tax preparer. So the first part is what tax documents to expect. One of the biggest CPA pain points, according to both advisors and CPAs interviewed on Kitsis and Retirement Tax Services, is chasing clients for missing forms. So the first part of your letter could be a simple checklist. WTs from employers, 1099 INTs and DIVs from bank and investments accounts, 1099B from brokerage accounts, 1099R for IRAs, pensions and UD distributions, SSA 1099 for Social Security, 1099NECs or MISCs for side gigs or consulting income, K1s for those partnerships, escorts, trusts, etc. If you custody assets or have clients that trigger K1s, you could be even more specific saying something like, "Hey, from Schwab Fidelity, you should expect a consolidated 1099 for your taxable investment accounts." The final versions are often not available till mid-February and some custodians may issue corrected versions all the way into March. We encourage clients not to file until early April, just in case. Section 2 could be something about what happened in their accounts this year. Not only are you helping your clients make their tax season easier, you're also reinforcing the value that you've brought to the table all year long. Behind the scenes or all the often forgotten stuff is really, really important. This is where you summarize the tax relevant moves that you helped implement. Bullet these out in plain English. So, for example, you could include things like retirement contributions. You contributed X number of dollars to your traditional IRA, or X number of dollars to your Roth IRA in 2025. We withheld X percent for state and federal on your RMDs. You contributed X to your SEP, your simple, your solo. Any Roth activity, we completed a Roth conversion of X number of dollars from your traditional IRA to your Roth IRA. Right? You can tell them what you withheld or what you didn't withhold. And they will then be able to make sure the tax preparer can make sure that your client has provided all the written documentation. I love when people include written minimum distributions and qualified charitable distributions. So, it could say something like your total RMD for 2025 was X number of dollars, which we satisfied from X account. Of that amount, Y was sent direct to charity as a qualified charitable distribution. This may reduce your taxable income if reported correctly. Right? You could also cover investment gains or losses. We realized X number of dollars in long-term gains and harvested X number of dollars in capital losses this year as part of your tax management strategy. You could include charitable and other planning items, whatever makes no most sense. Here's how much you contributed to a donor advice fund, or we helped you adjust your withholding to reflect your new income level. This is all information you already likely have inside of your CRM or portfolio system. And now you're just packaging it in a way that makes the CPA's life easier and makes your value really obvious. Section three is kind of how you'll coordinate with the CPA. Now, you can position yourself as the quarterback if you'd like to. You could say something like, "If you'd like, we are happy to share a copy of this summary directly with your tax professional and be available to answer any questions they may have about your accounts." This proactively solves CPA's biggest headaches, which is missing info and unclear transactions. And it helps deepen the relationship and possibly potentially generate referrals with these CPA's. Then we want to give them a clear next step, your clients, that is. Once you've gathered your documents, schedule your tax meeting, and if you'd like us to share this summary with your CPA, just email our team and we'll send it over securely. And then, of course, we need to include on this letter any disclaimers. So talk to your compliance team first and make sure that everything is kosher and good to go. So how do we do this, right? This sounds like a lot of information. So here's how to make it easy. Number one, I would, all year long, so going into 2026 here, you could start, and you don't have to do this for all of your clients. This could be a value add service that you provide just to your A clients or just to your B clients. And you could say, at the beginning of the year, we're going to create this tax letter for our top, let's say it's 24 clients. And then all year long, as you're doing things for them, update this template. So as you go have someone on your team go into all their accounts and document all of the 1099s and W2s and K1s and all of the things that they should have received this year. Anytime you make a change inside of the portfolios, go ahead and document it in there and then have somebody in your team come in and plug in the details. So for example, you could say, we distributed X number of RMDs this year from blank account. Then at the end of the year, somebody's job to go in, look up just the number, plug it in. And again, if we're only doing this for 10 to 24 clients, it's not going to be a really heavy lift. And a great time to do this is right after the first of the year. You'll have a little bit of lull. We're getting things set up for kind of Q1. And you can get all of that information. Now, of course, too, if a client is set to do the same thing, same Roth confusion, you already know this Roth conversion number, you already know the qualified charitable distribution number, you already know how much they're going to distribute from the RMD and what they were withholding, you could actually start this process even earlier. But don't make it more complicated than it needs to be. Yes, you can use an AI tool to go into your best clients and you could ask it like, hey, look at these 10 clients, please go through all of the documents and look for blotty blah blah. Number one, you're still going to need to double check because we need to make sure this information is correct. Number two, when you build out a template for each of these clients, you're going to be double checking AI work anyway. So you might as well just have somebody on your team. Take a quick peek at things. The good news is, is year over year, it pretty much looks the same for clients. So next year in 2027, it might just be a little tweaking of your 2026 numbers. But again, building out the structure. And this is different than the New Year's letter, which you're going to send at the end of December, obviously right in the new year. This is a tax season letter. So this needs to come sometime in, my suggestion is in early January, as your clients start thinking about gathering all of those documents for their tax preparer for tax season. Again, it's a value add. It's not necessarily appropriate to do for all of your clients. Whereas the New Year's letter could be scaled to be appropriate for every single person in your book, or you could break it down into tiers. This is going to be individualized to your best clients. So you're going to want to use a little discretion of how many you send out. But I find as a best practice, that as you're going throughout the year and doing different themes inside of your planning, it's easy to go to your top 10, your top 20 clients and just make those updates after the meeting. Or have it be a follow up task inside of your software that after the meeting with those particular clients, it triggers a task for somebody on your team to go in and add those items to their year end tax letter. So that's kind of an easier way. It makes it a little bit less of a lift at the end of the year, where it's not like somebody on your team has to sit down and write out the full 10 to 24 and figure out everything that you guys did for them all year. I find that by doing it in little bits and chunks, all of a sudden at the end of the year, it just needs to be cleaned up. The number is finalized and it's ready to go. Anyways, I hope this was helpful for you guys. I'd love to chat about it more over in the Efficient Advisor community, over on Facebook, or over on LinkedIn. My name's Hayden Lowry, and I just finished the Efficient Advisor System to Scale Group Coaching Program. I'm an advisor at the Investment Center Advisor Group in Loveland, Colorado. I was struggling with just about everything, but really at creating systems and processes for our business to allow us to not only scale, but also take care of our current clients. We just really didn't have many systems in place at all. But I can say after these last 10 months, we are in a much better place than we were before. We haven't even really finished implementing most of what we want to, so I can only imagine where we'll be at in about a year. But we have so much more structure and clarity around our business and where we need to be and where we want to go and how to create a better experience for our clients. What I really liked about the program, outside of all that we learned from Libby, was the interaction and learning from other advisors and just kind of talking to each other and seeing how everyone does it differently. But bouncing ideas off of one another, that was a really helpful piece for me. I would definitely encourage anyone that's on the fence to join this program. It will be some of the best money you spend on your business. And there's so much to learn from Libby. She's an awesome coach.