How Do Tax Professionals Identify Tax Advisory Opportunities?

Tax advisory opportunities often don't start with a client asking for tax planning.

They start with an indicator.

A client tells you they started working at a startup. You notice a large stock sale on their tax return. A business owner has teenage children. A married couple owns several rental properties and one spouse isn't working.

Those details should make you think:

"I should ask another question."

That's one of the most important skills I've learned from working with clients and training tax professionals:

"Ask questions and listen for indicators."

The goal isn't to immediately recommend a tax strategy. The goal is to recognize when something the client says, something you see on the tax return, or something you already know about the client deserves a closer look.

The Concept

What Is a Tax Advisory Indicator?

I think of an indicator as a fact or change in a client's situation that tells me there may be a planning opportunity worth investigating.

Indicators can show up almost anywhere.

They can come from:

• something the client tells you during a meeting
• something you notice on a tax return or tax document
• something you already know about the client's family, business, investments, or plans

After you've done tax planning for a while, you start recognizing patterns.

You hear something and think:

"I've heard this before. I know what I need to ask next."

That's where advisory can begin.

The Shift

Listen for the Indicator

One of the biggest changes I made in my client meetings was making sure they weren't just about collecting documents and checking items off a list.

I wanted to listen.

What changed?

What's happening with the client's business?

What's happening with their job?

What's happening with their family?

What are they planning to do next?

Over time, you start hearing the same types of situations repeatedly.

Those become indicators.

Example: "I Just Started Working at a Startup."

If a client tells me:

"I just started working at a startup."

I'm immediately thinking about equity compensation.

But I'm not going to start explaining ISOs, NSOs, AMT, exercise strategies, and every possible stock-option issue.

I'm going to ask questions.

"Are you getting stock options?"

If they say yes:

"Have they talked to you about them yet?"

Then:

"Do you know what type of stock option it is?"

I'm trying to narrow the situation before I start giving advice.

There's no reason to give the client a broad explanation about five different things when only one may actually apply to them.

The Documents

Indicators Can Also Be Hiding in the Tax Return

Client conversations aren't the only place I find advisory opportunities.

Sometimes the tax return tells me something the client never mentioned.

For example, I might see two W-2s and realize the client changed jobs during the year.

Maybe I recognize the new employer and know that employees there may have access to benefits or compensation arrangements worth discussing.

That gives me a reason to ask:

"You changed jobs last year. Have we talked about the retirement benefits and compensation options available through your new employer?"

I'm not trying to do all of the planning while I'm preparing the return.

I'm identifying something we should discuss for the coming year.

That's an important distinction.

Another Example: A Large Stock Sale

Suppose I'm preparing a return and discover that the client sold a large amount of stock without talking to me beforehand.

At that point, the transaction already happened.

My job for the tax return is to report it correctly.

But I might also tell the client:

"Next time you're planning a large stock sale, call me before you sell. There may be an opportunity for us to look at your tax lots and determine whether there is a better way to accomplish what you're trying to do."

That's how preparation can lead to advisory.

The tax return tells us what happened.

The advisory conversation asks:

"What should we do differently next time?"

The Pattern

Sometimes It Is a Combination of Indicators

One indicator by itself may not mean very much.

Sometimes it's the combination that gets my attention.

Suppose I see:

Profitable sole proprietorship + teenage children

That combination makes me think:

Should we investigate whether employing the children through the business makes sense?

Or I see:

Multiple rental properties + married couple + one spouse not working

That might make me ask whether the client's facts and participation could potentially support real estate professional status.

Again, the indicator isn't the recommendation.

It tells me:

Ask more questions.

The Discipline

The Indicator Is Not the Strategy

This is where I think tax professionals can get into trouble when they're first learning advisory.

They learn a tax strategy and suddenly want to recommend it every time they see something that looks remotely related.

That's backwards.

I prefer this process:

INDICATOR → ASK → CLARIFY → PINPOINT → INVESTIGATE → ADVISE

You notice something.

Then you ask questions.

Those answers help clarify what's actually happening.

Now you can pinpoint the relevant tax issue.

Then you investigate whether there's really an opportunity.

Only after that should you start making recommendations.

The Return

Tax Preparation Can Help You Find Advisory Opportunities

I don't like trying to prepare a tax return and do tax planning at the same time.

They're different types of work.

During tax preparation, we're primarily reporting what already happened.

And there's another practical reason I separate them:

It's hard to do two things well at the same time.

I'd rather finish the return.

But while preparing it, I'm paying attention.

I may discover something the client never told me.

A job change.

A new business.

Stock transactions.

Rental activity.

A change in income.

Something involving their children.

Those can become indicators that I flag for a separate conversation.

Once the return is finished, we can shift our attention from:

"What happened last year?"

to:

"What should we be thinking about this year?"

That's where a tax-planning conversation can begin.

For more on recognizing when the work itself changes from preparation to advisory, read Tax Preparation vs. Tax Advisory: Where Does One End and the Other Begin?

The Engagement

When Does It Become a Separate Tax-Planning Engagement?

I don't believe every question that comes up during tax preparation needs to become a separate engagement.

But when I start seeing enough indicators and believe there could be meaningful value for the client, I'll recommend tax planning.

I might say:

"A few things came up while we were preparing your return that I think are worth looking at more closely. We should schedule a separate tax-planning session."

That creates a clear distinction.

Tax preparation:

Report what already happened.

Tax planning:

Analyze what the client could do going forward.

The deeper analysis, calculations, comparisons, and recommendations belong in that planning work.

The Judgment

Not Every Client Needs Tax Planning

This is equally important:

Tax planning isn't for everyone.

You shouldn't force an advisory opportunity where one doesn't exist.

For example, you may have a retired couple receiving Social Security and taking retirement distributions.

Depending on their particular facts, there may not be enough meaningful planning opportunities to justify a larger tax-planning engagement.

That's okay.

Prepare the return and serve them well.

The objective isn't to turn every tax-preparation client into an advisory client.

The objective is to recognize the clients where advisory could provide meaningful value.

The Filter

A Tax Strategy Can Exist and Still Not Be a Good Recommendation

Potential tax savings aren't the only thing that matters.

Suppose you identify something that could theoretically save a client $20,000.

Sounds great.

But accomplishing it might require the client to:

• buy a rental property
• come up with the down payment
• renovate the property
• operate it as a short-term rental
• devote substantial time and effort to the activity
• satisfy the applicable tax requirements

The tax savings might be real if all the necessary facts and requirements are met.

But is the strategy actually feasible for that client?

That's a different question.

The Starting Point

You Don't Need to Know Everything Before You Start Listening

One thing I see with tax professionals who are newer to advisory is that they think they need to know every technical answer before they can have these conversations.

I don't think that's where you start.

The technical knowledge matters.

But first, you need to know how to recognize the situation and ask the right questions.

If a client says:

"I work at a startup."

You don't need to immediately give them a 20-minute explanation about stock options.

You need to recognize:

Startup → possible equity compensation → ask about it.

Then narrow the situation.

What type of equity?

What documents did they receive?

What has happened so far?

What decisions are coming?

Now you know what you actually need to research.

Getting Better

How Do You Get Better at Recognizing Indicators?

Practice.

There's still a learning curve when you start doing advisory.

You can eventually develop this experience by doing it yourself over and over, but guidance and practice can help accelerate the process.

That's a big part of what we work on inside Level Up Quest.

We don't just talk about tax strategies.

We practice the conversations.

Sometimes I'll act as the client and a member acts as the advisor.

I'll answer their questions.

I'll ask questions back.

They have to decide where to take the conversation.

Then we talk about what went well, what didn't, and what they could improve.

That feedback is important.

We also use group discussions during the Weekly Sprint and practice environments where members can work through client conversations before having to do it with an actual client.

The objective is to put in the reps.

After you've worked through enough planning situations, you start recognizing the patterns faster.

Eventually:

"I heard X, so I should ask about Y."

starts becoming much more natural.

In Practice

What This Looks Like in Practice

The Mindset

Tax Advisory Starts With Curiosity

When I think about identifying advisory opportunities, I don't think the answer is memorizing 100 tax strategies.

You need technical knowledge, but you also need curiosity.

Listen to what the client is telling you.

Pay attention to what's changing.

Look at the return for things you didn't know.

And when something gets your attention:

Ask another question.

You don't have to know the answer immediately.

You need to recognize that there is something worth investigating.

That's the skill.

Those indicators help guide the rest of the conversation and eventually help you pinpoint the tax issues and strategies that may actually matter to that client.

Level Up Quest

How Level Up Quest Helps Tax Professionals Practice This

This is one of the reasons Level Up Quest is built around more than watching courses.

Members learn practical concepts, practice client conversations, work through scenarios, discuss real situations during the Weekly Sprint, and receive feedback.

The goal is to shorten the distance between:

"I know this tax concept."

and

"I know when to recognize it, how to talk about it, and what to do next."

Learn it → Practice it → Apply it.