I met with a potential new client last Thursday. He is the son of a long-time friend and client. This young man went through a difficult divorce last year and the outcome had terrible tax consequences for him.

If only we had met last year during the divorce process, I could have saved him more in income taxes than my firms fee would be for the balance of his lifetime.

The best and easiest way to avoid over-paying taxes is to hire a tax professional; EA, CPA or attorney.

Many people will reason away the thought, thinking that the fee involved with hiring a tax professional will outweigh any tax savings. That is a possibility, but I can say that in the last thirty years I’ve seen that be the case very few times. I’m going to share just a couple of examples where I met new clients not long ago (no names or details of course).

New Client #1 – This gentleman had been retired for approximately ten years and had been reporting his retirement income to the State of Alabama and paying state income tax on it, roughly $800 per year. His retirement came from a Defined Benefit Plan which is not taxable by the state. We were able to go back and re-file his state returns and get $1,600 in refunds, plus we saved him $800 per year from now on. Unfortunately the statute of limitations prevented us from recovering approximately $6,400 he paid in previous years.

New Client #2 –This fellow had a letter from the IRS that said he owed $36,000. He was in shock when he came in. It turned out that he had done some “day trading” of stocks a couple of years ago, lost money on every trade and thought he didn’t have to report it. The IRS was attempting to tax him on the gross sales proceeds of all those transactions. When we corrected his return and claimed his cost basis in the stocks that he had bought and sold, the IRS gave him a $750 refund and paid him interest to boot.