Fred Katz's Tax Planning Secret Revealed: Ask Questions

Article excerpt

FREDERIC KATZ HAS AN INTERESTING PHILOSOPHY: "THE TIME TO DO TAX PLANNING IS NOT WHEN YOU ARE PREPARING A TAX RETURN."

Other than the more obvious reasons, "there are certain thoughts that go into planning during the year. There's an adequate amount of software out there, and, with adequate training, you can learn how to do preparation. However," Fred says, "it's the mechanical part--the preparation part--that is the culmination of good tax planning throughout the year. Otherwise, you're not performing the kind of service for your client that you should be."

After 34 years in public accounting, he has a well-rounded philosophy about tax planning and serving clients. Fred joined Braver and Company in Newton, Mass., five years ago as a principal. Prior to this affiliation, Fred was the managing partner of Katz, Baltimore & Company, P.C. in Newton, a firm that he created in 1973 and shaped for 26 years into a boutique accounting firm specializing in tax, financial planning and problem solving.

"What I do today is essentially the same thing but on a more limited scale," he says. "The number of clients that I care for now and the amount of activity per client is more focused compared to preparing a myriad of tax returns and trying to do tax planning for so many."

A member of the Tax Division of the AICPA, Massachusetts Society of CPAs (MSCPA) and Medical Group Management Association, Fred also serves as chairman of the MSCPA's Physicians and Health Care Committee.

He views his professional role as helping clients "from cradle to grave." That role began with a bachelor's degree in accounting and a master's degree in taxation from Bentley College in Waltham, Mass.

"I think back to when I originally thought about being an accountant, and I believe one of the things truly needed is people skills," says Fred, who feels he's not in a position to tell people how to spend their money. Instead, an accountant/advisor needs to have listening skills and introspection when it comes to talking with people.

"You don't talk to people. Whether they realize it, your clients are there because they want to share their thoughts with you, so what you have to do is have them express their thoughts by asking insightful questions. You're teaching people why it is in their interest to have different buckets, so to speak. If someone has income of, say, $100,000, and after tax it's $75,000, the question is: 'What is it that you want to accomplish?' Based on their aftertax income, you help them create a discipline for themselves. You don't impose your values on them, because everyone has their own priorities. Your role is to help your clients accomplish their goals."

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For Fred, the goal in financial and tax planning is to help clients define what is meant by point A and point B. "First, you help them find and understand what point A is by asking a series of questions--more for the purpose of them learning about themselves."

To help a client define point B, he throws out questions like, "Are you concerned about your children's education? Are you concerned about owning a house or condo? Are you concerned about retirement? Long-term care for yourselves? Parents? In-laws?" Fred believes the questions cause thoughts to germinate.

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He feels strongly that, when the clients are married, questions need to be posed to both the husband and wife. "I know that, in some cases, accountants meet primarily with the husband. Big mistake. Hopefully, husbands and wives have the kind of relationship where they share with one another, and, therefore, these are all joint decisions."

Staying Ahead of Tax Changes and Clients

To advise couples and individuals effectively, Fred stays abreast of the many changes to rulings affecting tax planning. He finds he must also stay "ahead" of his clients. According to Fred, a major issue that has hit the table in the last several years is the Alternative Minimum Tax (AMT). …