AA 119 | Free Tax Advice

 

Free tax advice may seem benevolent, but beware of the hidden costs it imposes on your firm’s growth. Today, we have a remarkable guest who is set to revolutionize the world of tax planning. Meet Dominique Molina, the visionary co-founder and president of the American Institute of Certified Tax Planners. Her mission? To ensure that tax professionals never miss government tax breaks that could save their clients millions of dollars. In this episode, Dominique uncovers the hidden dangers and consequences of giving away free tax advice. She shares her firsthand experience of the potential liabilities that lurk in offering free advice without proper analysis. Dominique also touches on the critical IRS circular 230 rules, revealing the legal responsibilities of tax advisors in providing accurate and well-informed advice. She stresses the importance of protecting not only yourself but also your clients from the risks of misinformation or misinterpretation. Join us as we uncover the dangers and rewards of giving tax advice for free.

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The Hidden Costs: The Pitfalls And Risks Of Giving Free Tax Advice With Dominique Molina

In this episode, we have a very special guest. Our special guest is the Cofounder and President of the American Institute of Certified Tax Planners, the driving force and visionary behind the San Diego-based not-for-profit. Our special guest has set out to change the way tax professionals approach tax planning, realizing that many tax professionals were missing government tax breaks that could save their clients millions of dollars. She created an elite network of tax professionals, including CPAs, EAs, and tax attorneys who are all trained to help their clients proactively plan and implement tax strategies that rescue thousands of dollars in wasted tax.

Before we welcome our special guest to the show, can you imagine being able to increase your base fees by over 300% or even double your revenue this year? What about collecting 100% of the AR that maybe isn’t collected yet, getting paid 100% upfront, and spend as much time with your family as you want, and even taking vacations during the next tax season? These are some of the results that the accounting tax and bookkeeping firm owners that I work with have been able to accomplish and they all started by watching my free training.

I will show you the four shifts to charge higher fees and double your firm revenue without having to work harder or add on any new clients so that you can end the resentment, end the fourteen-hour day grinds, and get the excitement back that you had for your firm when you first started it. Sign up right now at TheAbundantAccountant.com/masterclass. Now let’s welcome our very special guest, Dominique Molina, to the show.

Welcome, Dominique, to the show.

Thanks for having me back. It’s always fun to be here.

Thank you so much for being here with us again. For those of you who don’t know her, Dominique, why don’t you share who you are and what you do? For the EAs and CPAs out there, make sure to keep your eyes perked because this one is for you.

My name is Dominique Molina. I’m a CPA. I have a Master’s in Tax Law and I’m also a Certified Tax Strategist. I lead the American Institute of Certified Tax Planners. We are an association and licensing program for CPAs, enrolled agents, and attorneys who want to focus on tax reduction in their practice. We are an education program to give you all of those details on how to do it and how to do it right.

Here at the show, we have worked with many certified tax coaches and strategists and have been able to convert higher tax plans and effectively help your clients at a higher level so you can get paid a lot more and not have to work so much. Dominique’s program is amazing. If you are an EA or a CPA, you should check it out. In this episode, we are going to be talking about the risk of giving away free advice to your clients. A lot of accounting and bookkeeping firm owners and tax firm owners get stuck in this rut because we want to help everyone.

We are people pleasers, and yet we give away free advice thinking that it’s a good thing, when in reality, it hurts us in so many different ways. There’s so much liability that I know you are going to share. I’m very excited about this conversation because if you take notes and think about what we are talking about, it will not only prevent you from not having more money in your bank account but it will help you help more people in the end. Sometimes, when we give away free advice, we think we are helping people, but in reality, we are not, right?

Right. We have different motivations, as you said for why we want to do it. We want to help people. We are plain old and busy. Sometimes, it’s easier to blab out some advice and get it off of our to-do list. We also want to demonstrate that we know what we are talking about. Our goal is to try to build up trust and confidence with either that prospective client or an existing client.

AA 119 | Free Tax Advice

Free Tax Advice: Our goal is to try to build up trust and confidence with either that prospective client or an existing client.

 

We have different motives for what we are trying to do with giving away things for free but when it comes to trying to prove that we know something, it can have the opposite effect. Here’s why. When you give away what seems like a solution, you have to keep in mind that we have to always take the perspective from our client’s point of view.

Sitting in their shoes, they don’t understand most of what we do. If we blab out a solution such as Augusta Rule, hire your kids, or home office, they don’t understand the depth and the nuance that is there and they certainly don’t understand what’s required to implement that. Here’s where the problem creeps in. The problem creeping in is that when you say a home office or become an S-Corp, in their mind, the problem is now solved. In their mind, there isn’t an issue that needs work to be done. In effect, when you are giving away that advice, it feels to them you are already done with the solution. What we are intending is to highlight that there’s a problem.

I don’t even know what the Augusta rule means, but let’s call it that. If the client believes that their problem is solved, then they think that’s it. There’s nothing else I need to engage your firm with. There’s nothing else I have figured out. Yet, there might be so many different layers to this rule and calculations that need to be made or other resources you need to hire in order to implement that piece of a plan. When we give away the answer from a sales perspective, it’s hurting you because now you can’t have an annual engagement and they think it’s a one-and-done. “You solved my problem, I’m good to go.”

In reality, this might be something, and maybe you can share a little bit about it. What’s involved in that advice? What are the implementations that are required to make that happen for the taxpayer and how that client should probably need your hand? You need to hold their hand for more than, “Here’s your answer. Goodbye. That’s it.”

I almost think of this too. We find ourselves often under duress when we give these answers because it comes in as a so-called quick question. I think you have a button that says no more quick questions, right?

My button says, “I will bill and charge you for all of the questions because there is no such thing as a quick question.” In your world too, there’s no such thing as an emergency. I know a lot of you get, whatever your name is, “I have a quick question. This is an emergency. It will take five minutes,” and you are like, “There’s no answer that would take five minutes in the world of what you guys do.” It’s impossible.

We don’t often have all of the necessary information to conclude anything. Again, I don’t know that our intention is to give them a final piece of advice, but we often find ourselves doing that to accomplish something else. It backfires because now what you have got is a client that thinks it’s done. If you say, “I’d to engage with you to do a tax plan,” in their mind, it’s done. They don’t need anything because you gave them everything they need to know.

Also, it’s not a way to prove that you know something when you blurt out the strategy that you want to use, even though underneath the strategy, there are ten different layers below that. When we do that, we are also putting ourselves in a position to lose credibility.

It does undermine our credibility. Here’s how. It’s because it’s a little unrealistic. Think about this, especially with our prospective clients, how would you know? You just met them, so how would you know what the ideal solution is for them? How would you know when maybe you are looking at last year’s tax return, what all they have going on, the nuance and the depth of their business, or their personal lives? If I come across that, I’m like, “Here’s what we are going to do. We are going to form an S Corporation for you.”

That’s also a little bit unrealistic that you would have that definition of an answer without either doing more work or knowing more about them. This is more of an unconscious thing that’s happening psychologically between us and our client/prospective client, but it does backfire. It undermines your credibility. The question comes back then. If I am not going to give away advice to demonstrate that I know something, how do I prove that I know what I’m talking about? You have a solution for this, don’t you?

I do, but I want to hear what you have to say. How do we stop ourselves on our track of not giving away free advice? In reality, you think you are giving away this free advice, but then you are undermining your credibility, the prospect or your prospective client thinks you solved their problem. Now they don’t need you and you can’t help them because, in their mind, they are good to go. It’s a lose-lose-lose situation. What do you think it is?

What I was going to say is with all of your knowledge, you know the areas to look at and the questions to ask. It’s amazing if you sit down with a file and you think of all of the questions you have about it, it could be, “Why doesn’t this K-1 match what the 1120-S says? I see that they had a loss last year, but I don’t see where this carries forward into the current year.” All of those questions are excellent opportunities to open dialogue. Will the client know the answers to those technical questions? Probably not but do you see how in that process you are demonstrating that you know what you are talking about? That does a lot more to build rapport, trust, and confidence than you ever could by always having the answer.

AA 119 | Free Tax Advice

Free Tax Advice: When you know what you’re talking about, it does a lot more to build rapport, trust, and confidence than you ever could by just always having the answer.

 

It builds curiosity for the prospect or the client sitting in front of you. It’s not like they came out and blurted out this Augusta or whatever is the actual answer but by asking good questions that have them say, “I have never been asked that before by another firm. That’s another good question. I have never heard of that before. How come my last firm or my last CPA has never asked me any of these questions?” You then now look like the superhero. You are now showing your knowledge without anything except asking smart questions. That can build, not only what you said, the know, like, and trust factor, but it builds credibility instead of having you lose credibility.

The other way is a credibility loss. By asking great questions and not saying, “Here’s the answer,” even though it might still be the answer, it shows that you are getting to know them, but you are also talking about things that are very intelligent, unique, and different that no other firm owner has ever asked because they are too busy running around with their head cut off. They are inundated with work. They have way too many clients. They are working 12 or 15-hour days. They are going from meeting to meeting. They can barely eat lunch. When you can slow down and ask these types of questions, as you said, it builds that rapport too.

You said it and I’m going to be a little more direct to sum up what you said and that is you are demonstrating the difference. They are experiencing that you are different. That’s important with value pricing. If you are going to come in and charge ten times what the so-called going rate is for something, you have to create this perception that they are convinced they cannot get this level of service someplace else.

If you're going to come in and charge ten times what the so-called going rate is for something, you have to create this perception that they cannot get this level of service someplace else. Share on X

That starts from the minute that you meet somebody. They have that experience. It has to be different. Let’s throw in a third thing in the conversation about why you don’t want to give away free advice. That’s because you are assuming so much liability and nobody would get out of bed if they thought about how much liability they are taking on with this process. I want to talk a little bit about that.

Have you had any of the firm owners to whom you have taught all of this stuff where they gave away free advice and risked their liability so much that they got into trouble? A story or a great example would be fantastic.

I will tell you that I’m scheduled to fly across the country to testify in a trial against a planner, specifically with the Augusta Rule, so that’s top of mind. That’s why I slipped that in there. This wasn’t a setup, I swear. We take on so much liability and this stems from the Circular 230 Rules that we all must adhere to as practitioners.

There were some revisions to that. In 2014, the government relaxed some of the rules. What I’m speaking of specifically is Section 10.35, which has to deal with tax advice. What our responsibilities are as a practitioner before the IRS when it comes to tax advice to our clients? These rules are designed to increase the quality of the tax advice that people receive.

What happens is you have probably seen those disclaimers at the bottom of emails. If you have been emailing tax practitioners, it says, “You can’t rely on anything here for advice.” The government determined that the disclaimer was way overused. It doesn’t have an effect. They did away with that. That opt-out language is eliminated from Circular 230 now, but the revision doesn’t eliminate all of our standards for tax advice. That’s what I thought was important to talk about as well because I know that most practitioners don’t think about this.

When they are rattling off the answer to a so-called quick question, do you realize that you are creating liability for yourself in the event that somebody either A) Implements your advice wrong, B) Misinterprets the advice that you are giving and has consequences, or C) Maybe you have inadvertently even given some incorrect advice simply because you don’t have all the information you need to give an accurate piece of advice at that time?

It’s profound and it’s scary. I encourage everybody tuning into this to go in and read Section 10.37, which talks about all of the things that are covered when we are talking about advice. We have to base our advice on reasonable, factual, and legal assumptions. We have to reasonably consider all relevant facts. How do we do that if we don’t have enough information at that moment? We have to use reasonable efforts to identify and ascertain facts relevant to the advice and we have to relate applicable law and authorities to those facts. This is huge. I know that the IRS is understaffed and they probably aren’t enforcing as much as they possibly could because there’s so much volume there.

We have to base our advice on reasonable, factual, and legal assumptions. We have to reasonably consider all relevant facts. Share on X

You never want to end up on the unlucky side of that because somebody has misinterpreted your advice. That game of telephone by the time it gets around to the fence and says, “Michelle told me I could do the Augusta Rule and that means I could rent my house and my relatives are going to move in. That’s all a tax write-off.” By the time they hear it, it’s all twisted. What do you have left to protect yourself? You have nothing. It’s your word against their word.

For those reading, you might want to take some notes because I’m sure Dominique is going to have something good to say. Let’s say you were to meet with a prospect and a client calls you with all of the stuff that she listed with the liability. How would you respond to a prospect that says, “I have a quick question? I have got this scenario. What do you think?” In our mind, you used to blurt out what you thought, but now, you need to slow down. Maybe put a sticky note on your computer and put liability.

What’s a good way to say something to a prospect in order to get them into a meeting with you so then you can start to demonstrate the difference on why you are unique and different from other firm owners by asking great questions like the ones you shared? I don’t remember what you said, but it builds rapport and credibility in the right way. What’s a way that you could explain it to the prospect where they don’t feel off-put and you can feel good about it?

This is the time to pull out the go-to response that every attorney and accountant has in their back pocket. This is the time to say, “That’s a great question and it depends.” The answer depends. It depends on a number of factors. While I won’t be able to give you an answer in this call or an email, I’d be happy to explore that for you. I’m going to need some additional information. We can set up an appointment. If it’s an existing client and you are working with them on a year-round bundled service agreement or a subscription agreement, you can say, “That’s a great question for our next meeting. I will be prepared for that and I will get back to you with additional information that I might need.”

If it’s a prospective client depending on what your process is for handling incoming prospects, follow that script that you use. If you offer a complimentary consultation or you are a planner and you use a discovery session as a mechanism for selling your services, that’s how you handle that. It puts distance between you and the question, number one, so you don’t feel on the spot because that’s the other thing. You have got a lot of things swimming around in your brain and then all of a sudden, the record scratches and stops. You are trying to come up with an answer on the fly and you are under duress.

It’s your natural default. It’s the natural way that so many firm owners have been operating under chaos literally. We think we have to answer everything right away. We don’t want to add another thing to our to-do list. We are already overworked. Some of us feel underpaid and completely overwhelmed. When you are coming from that place, we want to blurt out things. How do you make the liability of the law the number one deterrent for you to slow down?

Here’s my response to that and my advice behind this. You have to be able to protect yourself whenever you are giving tax advice. The way that you do that is by putting things in writing. Now we lost half of the readers because they didn’t want to do that. They are going, “I don’t have time to write all this down.” It’s true. You don’t. To me, that’s the ultimate deterrent. If I know I have to be able to put that in writing so I can protect myself, prove that I disclosed everything that needs to be disclosed about that advice that I’m rendering, and prove that I said what I said I said. That takes time.

AA 119 | Free Tax Advice

Free Tax Advice: You have to be able to protect yourself whenever you’re giving tax advice. The way that you do that is by putting things in writing.

 

If something is going to take me writing it down, then I have to get paid and I have to get paid well for that so that I can be thorough in my answer. I can provide research if I need citations and that’s going to be best for me. We have to protect our livelihoods. These people that we work with, that’s not their concern. No one is going to step up for you.

Now you are going to be testifying. I’m sure this person didn’t realize that was an implication of what could happen to them.

I don’t think so.

I don’t think so either. That’s not a fun place to be.

We can all learn from that.

We can. Don’t reinvent the wheel on this. That’s what we are trying to say. Are there any other risks of giving away free tax advice to clients or prospects without going through the proper channels, getting more information, and having proper meetings instead of blurting out answers or like you have shared in the past, creating a Band-Aid effect, which clearly won’t solve anyone’s problem?

The possibility of giving wrong advice. Again, it comes down to, usually, we don’t have enough information to know for sure that that’s ideal for someone. The other thing is, if you think about it from an advisory standpoint, the work we are doing in advisory services is we are analyzing. We are looking at all the possible solutions to a problem and we are analyzing to determine what’s optimal. If you respond and give an answer to a question, where’s the analysis in that?

There is no analysis.

It’s like that concept when you are in school. It drove me crazy in grade school because I would always get a markdown grade with a note, “Show your work.” You got the answer right but you did it in your head. We have to be able to show our work and we can’t do that by thinking through something on the fly in our brain. We want to protect ourselves and our clients from getting bad advice and ultimately, we want to build that trust and confidence. All of that comes down to not giving away free advice.

We want to protect ourselves and our clients from getting bad advice and ultimately, we want to build that trust and confidence. All of that comes down to not giving away free advice. Share on X

I agree. When we don’t give away free advice from the sales side of things, you will have many more clients. When you have more clients, that means that you will have more revenue. When you charge ten times the amount and have this great unique experience, you will not have to have as many clients. The volume will decrease and the revenue will increase. When we blurt out these answers and now the client thinks you have solved their problem, they don’t need you. We have to have it, not only do they have trust and confidence and you are protecting yourself and your client, but you are doing the right thing. Not giving this advice is doing the right thing. Those are all the risks at hand. It’s better to not do any of it. Is there anything else that you’d like to share?

No. Now that everybody is terrified and they don’t want to go to work after reading this.

I agree. That’s a good thing. We weren’t here to terrify you, but we are here to increase your revenue and bank accounts, have you work with less clients, enjoy the work that you do, and slow down. Putting these things into practice and going and reading, what was it? Section 1037 you said.

It’s Circular 230. Specifically, the parts that we talked about are 10.35 and 10.37. There’s a lot of gobbledygook there. Ultimately, it does clarify what we are required to do. Hopefully, that will lead to us giving things away for free so you all now have permission to protect yourself first. It’s okay. Even a response to your client if they are pressuring you, “I need an answer now. Why won’t you tell me the answer?” “It’s because I have to protect myself and my license. I’m required by law to follow requirements. I’m going to put some time into this and I will create a written response for you that you can rely on.”

That’s perfect. As Dominique said, she has given you permission to keep your mouth shut. With that, thank you so much for being here with us on the show. It’s always an honor to have you.

Thank you.

Thank you all so much for joining Dominique and I on another amazing episode. There’s so much goodness in that. You might want to re-read and take copious notes because the risk of giving away free tax advice is not going to jail. I was talking to her after we ended the show and I was like, “We need to do a part two after you get back from testifying on the East Coast,” because this guy has twenty counts against him from different clients dating back several years. I’m very curious about how that ends up, but I don’t want that to happen to you. Giving away free advice can seem like the solution is perfect. However, it’s not. It doesn’t do you any good. It doesn’t do the client any good. It doesn’t bring you in more revenue and helps you gain more clients so you can help them.

Imagine being able to attract and convert more clients, double your revenue, get paid upfront, and get paid for even discovery meetings if that’s what you want to do, but ultimately spend more time with your family. Those are some of the results that the firm owners that we work with have been able to accomplish. They all started by watching one of my free trainings at TheAbundantAccountant.com/masterclass. In this training, I will show you the four shifts to charge higher fees, double your firm revenue, not work harder, and not take on any new clients, especially if you have a lot of clients.

We will taper it down so you can end the resentment and give away free advice. You can end the 14-hour day grinds and you can get the excitement and love back that you had for your firm when you first started it. Remember to sign up at TheAbundantAccountant.com/masterclass. I look forward to seeing you there, and I look forward to seeing you in our next episode. Have a great day.

 

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About Dominique Molina

AA 119 | Free Tax AdviceDominique Molina, CPA, MST, CTS, is the co-founder and President of the American Institute of Certified Tax Planners (AICTP). As the driving force and visionary behind the San Diego-based not-for-profit corporation, Dominique set out to change the way tax professionals approach tax planning. Realizing that many tax professionals were missing government tax breaks that could save their clients millions, she created an elite network of tax professionals including CPAs, EAs and tax attorneys who are trained to help their clients proactively plan and implement tax strategies that can rescue thousands of dollars in wasted tax. Dominique has successfully licensed over 1,000 tax professionals as Certified Tax Planners across the country.

Dominique successfully managed her own practice, a San Diego-based, full-service tax, accounting, and business consulting firm, serving hundreds of business owners and investors across the country for seven years. She has a bachelor’s degree in Accounting from San Diego State University, is a licensed CPA, has a Masters of Law – LLM, Tax Law, from Thomas Jefferson School of Law, and is a Certified Tax Strategist. Ms. Molina is an accomplished keynote speaker, teacher, 6-time best-selling author, and mentor to tax professionals across the United States. She routinely speaks for Surgent CPE and the AICPA Women’s Leadership Summit, among other leading professional groups.

 

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