How CPAs Help Their Clients Manage Debt
July 30th, 2018Certified Public Accountants (CPAs) may be known for filing taxes, but they have way more than just that to offer their clients. One of the most beneficial services CPAs provide is debt management. Excessive debt can hold people back from achieving their financial goals and is a significant cause of personal stress, but CPAs are a solution. Learn more about how CPAs help their clients manage debt.
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Research Options
One of the main ways CPAs can help clients manage their debt is by working with them to research the best debt management options for their unique situations. This can include working with creditors to negotiate payment plans or lower interest rates, evaluate debt consolidation companies to ensure they are not scams and will be beneficial, or determine if bankruptcy is the best option.
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Potential Tax Issues
Often clients do not realize that dealing with their debt may have tax ramifications, so CPAs can offer advice and let them know what to expect. For instance, if debt of a certain level is forgiven or discharged, it may count as income on which taxes are owed. Another possible tax issue is if a client receives a substantial gift from a family member or friend to cover the debt, that donor may be subject to a gift tax.
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Dealing With Creditors
When clients are in debt, they may also be under significant stress dealing with debt collectors. CPAs can provide helpful information so their clients understand their rights when dealing with creditors in order to protect themselves. CPAs can advise their clients on when they should talk to collectors, when they should pay versus when they should wait, and what actions are illegal on the part of collectors.
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Develop a Budget
Perhaps most importantly, CPAs can work with their clients and get to the root of their debt problem and prevent it from continuing by helping them develop a personal budget. CPAs can review their clients’ expenses and spending habits to figure out where changes could be made to allow them to live within their means and find more available funds to cover debt or add to savings.
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