Over the past few years, you may have considered Pay-by-Refund – also known as “refund transfer” – for clients who live paycheck to paycheck, but this year, think again. No matter how much money your clients make or what life stage they are in, they might have run into tough financial challenges. As their tax preparer, you can help make a difference.
Toughing out Record-Breaking Storms
“Harvey was the worst disaster in Texas history, and will impact the United States’ second-largest economy for years to come,” said Brock Long, director of the Federal Emergency Management Agency. While Hurricane Katrina displaced more than 400,000 in 2005, estimates predict that 450,000 people were displaced by Tropical Storm Harvey. To provide a sense of the catastrophic loss and scope of people affected, damages are estimated to cost upwards of $60 billion for Harvey alone. In addition, only 17 percent of homeowners in the eight counties most directly affected by Harvey had flood insurance policies.
Harvey wasn’t an isolated storm. 2017 also saw two other Category 4 hurricanes make U.S. landfall: Irma in Florida, and Maria in Puerto Rico and the Virgin Islands. Across the country, dozens of savage hailstorms and tornadoes wreaked havoc, causing billions of dollars of damage and leading to the second-most disaster-laden season on record.
These storms hit many hard with strong socio-economic ripple effects. Homes were lost, and jobs and livelihoods were suddenly gone.
Tough Times in Later Years
Natural disasters are one thing, but other factors also compound hard times for taxpayers. People you thought were in great shape in the past might be teetering financially this year.
For example, although the national rate of divorce in the United States is trending down, the divorce rate among those 50 and older known is ticking up sharply. Known as “gray divorce,” the rate has surged 50 percent in the past 20 years, with one in four couples divorcing after age 50. In fact, between 1990 and 2012, the number of divorces among people ages 55 to 64 more than doubled; it tripled for those age 65 and older.
This frequently results in extraordinary financial pain, especially since spouses who divorce later in life have less time to fully recover from the loss by working. It can dramatically handicap their ability to maintain a suitable standard of living.
How to Help Your Clients
This coming tax season, determine if you have clients who are suddenly struggling to recover from unanticipated setbacks. Ask lots of questions, even if you think you already know the answers. The trick in spotting those affected, especially if you have become accustomed to working remotely, might lie in having at least one face-to-face meeting. People are often embarrassed to disclose their hardships.
Listen carefully, continue to build trust in a confidential environment and consider whether you can help make a difference to their financial welfare by uncovering non-obvious tax credit opportunities, confirming early in the season how much their refund will be, and offering Pay-by-Refund so they won’t have to worry about paying your fee up front.
You may not think of yourself as someone who is on the frontlines of helping mitigate financial hardship for people in the midst of a personal crisis, but the fact is that you might be. Listen carefully and help where you can.