Tax Transcripts: What are they anyway?
October 01, 2019

Tax season is still a few months off, but it is always a good idea to make sure one has their ducks in a row. One such tool available to tax preparers is the tax transcripts. However, with so many different transcripts available combined with the changes the IRS made to these documents, it is easy to become confused. 

What are tax transcripts? Why are they useful?

What are tax transcripts?

Tax transcripts are documents provided by the IRS describing a taxpayer’s returns. These transcripts give details on a return in lieu of a full copy of a tax return. While no transcript provides all the information provided in a tax return, different transcripts provide different information.

Before understanding why tax transcripts are useful, let’s review the different types available to the public. There are five different types of transcripts preparers can request from the IRS.

  • Tax Return Transcript: Shows most line items from your original tax return. It doesn’t show changes after you filed your original return. These types of transcripts are only available for the current year.
  • Tax Account Transcript: Shows basic information on the taxpayer as well as any changes made to their original returns. These types of files are available for up to ten years.
  • Record of Account Transcript: Combines Account and Return transcripts into a single document. The current year and up to three previous years are available.
  • Wages and Income Transcript- Shows information from a taxpayer’s income side.
  • Verification of Non-filing letter- Proves that a taxpayer did not file for a given year.

 Why would you want them?

The IRS recommends that a taxpayer keeps their tax forms for three years. 

 If a person has lost their copies of a tax form, they can certainly use their transcript to get their income history. The forms certainly help a tax preparer compile accurate future tax returns. 

However, even those who have their past returns find tax transcripts incredibly useful. For instance, individuals and businesses may better understand their status with the IRS.  Additionally, the documents to frequently used to resolve notices and discrepancies. Often, lenders may require a tax transcript as part of their application process. 

Changes at the IRS

In August of 2018, the IRS put in place new security around tax transcripts. These new precautions help protect taxpayers from unscrupulous criminals from gaining access to data to perpetrate fraud. Those who have been using tax transcripts in the past are likely to notice significant changes.

Some of the most significant changes are around securing identifying data fields. Moving forward, tax transcripts will provide

  • Last 4 digits of any SSN listed on the transcript: XXX-XX-1234
  • Last 4 digits of any EIN listed on the transcript: XX-XXX-1234
  • First 4 characters of the last name for any individual or business name
  • First 6 characters of the street address, including spaces
  • Last 4 digits of any account or telephone number
  • All money amounts, including balance due, interest and penalties

In short tax transcripts (and EIN verification services like EINFinder.com) ensure tax preparers include correct information on returns. These tools help reduce the chance of filing time-consuming amendments.

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What is an API and Why Should I Want One? (Part Two)
March 25, 2019

Now that you have learned a little bit about what an API is, here are some ways companies have put APIs to work for them!

While the limit of how the API can be implemented is constrained only by your imagination and developers, there are some general uses many in the Retirement market are drawn. These use cases include:

FILL IN THE WHITE SPACE OF CRMS

One frequent use of an API is to fill in the white space found in many CRMs. Through hard work, many businesses have built impressive lists of leads and clients. However, even the most diligent data collection team could use the help.

  • Fill in basic company information such as business name, address, phone numbers, even their federal Employer Identification Number (EIN).
  • Load essential details about a company’s retirement plan, such as what type of plans they have and the number of participants in those plans.

In the future, JDA may even begin providing contacts for the companies such as the CFO, or heads of their Benefits and HR departments.

WEBFORM VERIFICATION

Many businesses, especially those in the small business market, seek a basic level of authentication of a potential client’s identity to qualify them as a lead. A great way to automate this basic level of qualification is through a web form.
The web form requests the client to provide some necessary information about themselves, frequently including the business name and EIN. A web form
connected to the JDA API can then instantaneously verify this data. As the API data includes confidence scores relating to a company’s name, EIN, and address,
you will get a clear picture of the lead.
This automatic first tier qualification will save you time chasing down poor leads and lower the chance for fraudulent clients.

KYC COMPLIANCE

Since the implementation in 2012 of FINRA Rule 2090 and Rule 2111, it’s become extremely important for brokers to obtain and maintain some basic facts of each  Customer they work with. Manually creating these profiles can be a daunting task. This is where the automation allowed by an API can save time and money while lessening the change for error introduced by manual input.
By connecting the JDA API into your KYC process, you gain the ability not only to verify the information you have but collect data you don’t have on your client list. You no longer have to spend the effort chasing down a client’s name, EIN, or address. Our API can be used to provide data automatically. Even periodically re-verify the data to make sure it is still accurate.

FORM CREATION SUPPORT

Often a broker may want to send correspondence to a potential client, perhaps a  proposal. Marketing departments also like to reach out to multiple leads at
the same time using a marketing template populated with text specific to the lead they are reaching out.
The API is a perfect way to bring specific data related to the target of the correspondence into the documentation process.

  • Quote generation: By pinging our API, you can pull in data such as the number of participants and plan types a sponsor currently has. This data will allow you to build tools to provide you with general quotes for a client without having to manually look up a plan or ask the client for details.
  • The Proposal: A proposal or contract template can now include information such as the types of plans a sponsor currently has, these plans’ renewal dates, and general business information such as address and phone number.

 

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What is an API and Why Should I Want One? (Part One)
March 18, 2019

What is an API?

An API (or Automated Program Interface) is a set of tools, protocols, and definitions developers use to allow automated communication between different systems. Chances are you interact with APIs and are not even aware of it. Data requests transfer information between systems. This integration supports a company’s internal or web applications without the need for manual input. It is a seamless way your data team can provide solutions to the departments they support!

APIs are limited only by your team’s ability to integrate the data the API supplies. An API is a way of transferring requested data, therefore, your development team is not limited in how and where to use the information.

What do all these terms mean?

There are many different ways to approach building an API.  Judy Diamond Associates designed their API with a developers ease of use foremost in mind.  Novices to the world of API find it useful to understand the following when discussing APIs with developers.

Authentication

Authentication is typically a key, password, or token included within a Send Request (see below). The token tells the receiving system that the request is valid and a response should be generated.

JSON

Also known as JavaScript Object Notation, is an open-standard file format. It uses text that is easily read and understood by humans to transmit data. It’s a great choice for APIs, especially those that are cloud-based.

RESTful

RESTful (often shortened to REST) APIs refer to APIs or web services which are based in REST technology. REST is a web services development architectural style commonly used by developers. Its design makes it able to handle load changes and, therefore, easily scalable. It’s a great choice for APIs, especially cloud-based ones.

Return Response

A return response generated and sent back to to the system that made the request. Typically the response will include a status code and data.

Send Request

The term describing a system reaching out to an outside database through an API. The term “call” sometimes replaces “request”.

How can I use an API?

For those in the group insurance or retirement markets, there are some amazing use cases for a well-curated API. In fact, any business plan in the B2B or small business market can increase efficiency and decrease error by incorporating an API into their workflow.  This is a big topic, and there are almost infinite ways to use an API. Check back to the next in this series where we will look into specific ways you can make an API work for you!

 

 

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Prospecting With The 5500 – Planing your First Meeting
February 25, 2019

Using 5500 Data for Offensive and Defense Business Development (Part 4): Planning the First Meeting

Meeting with a potential lead is the first big step in winning their business. While personal preference determines the style of your pitch, it is always a good idea to back your pitch with data. Additionally, being able to tailor your pitch to each lead, quickly, is invaluable.

It is also a good idea to present your pitch using multiple modes of communication. While you are going to be speaking your potential clients, remember that not everybody learns or retains information the sale way. For instance, while listening to a speaker may help some, others are more visual learners and react better to charts and graphs. Still others prefer to read the material to listening to a speaker.

It’s a good idea to plan on presenting your pitch to a lead using multiple modes of communication. That way,

PLAN REPORTS

When discussing the future of a lead’s retirement plan, it is often helpful to be able to talk confidently and clearly about the plan’s past. Building a detailed history of a plan will help you show negative trends to a client; trends that you would be able to avoid.

CHARTS AND GRAPHS

Some people learn by reading the material, others, by hearing it. Still, other people best consume data by seeing it. It is important
to provide your lead with the same data in multiple ways. This increases the impact of your presentation and makes complex information more easily understood by your potential clients.

THE VERBAL PITCH

Sometimes even the most seasoned salesperson may forget the importance of their verbal pitch. And there are times that new financial advisors may need a little guidance or inspiration in how to start a pitch. While your verbal pitch should reinforce the visuals of your graphs and the data-heavy details of your reports, it should not be a recitation of these facts. This is where an advisor can reveal how they are able to solve the challenges unique to the sponsor.

THE JDA ADVANTAGE: Our tools are designed to help make your presentation shine. Our Dynamic Plan reports consolidate all our research on a plan into one modular, presentation-ready document. Have all the specific details about a lead’s current plan neatly organized and right at your fingertips.
The performance-based Benchmarking tool in our Prospector Plus creates downloadable professional-looking graphs and charts. By inserting these into your sales deck or pitchbook, you will be able to walk your clients through all the reasons why they would be better off working with you.Need some inspiration? Prospector Plus’s talking points help walk you through a plan’s weak spots. They also suggest different approaches to help your leads understand the challenges their plan contains.

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Prospecting the Federal Form 5500 – The Offensive Approach
February 18, 2019

Using 5500 Data for Offensive and Defense Business Development (Part 3): The Offensive Approach

The most common, and effective, way to use Retirement Plan Prospector is offensively. The size of the data pool contained in the data set not only provides brokers with a massive lead list but also provides details required to make a data-driven business development plan work.

IDENTIFY THE BEST TARGETS

While looking for red flags and plan scores are a great way to begin identifying the leads with the highest chance of conversion, that is just the beginning. If you know of a competitor’s offering that you outperform, locating the plans they manage is a great way to focus your efforts.

THE UNSATISFIED/VERY SATISFIED CLIENTS

Retirement Plan Prospector has data on plans stretching back nearly 10 years. This history can show sponsors who frequently change their financial advisors. Noticing that a sponsor changes their FA every couple of years might indicate that they are likely to reevaluate their current plans. However, such a sponsor might be hard to retain. On the other hand, you could identify sponsors who tend to pick and advisor and stick with them. These leads might be more difficult to win but are likely to stick with you once you have won their business.

THE BOOK OF BUSINESS COMPARISON

Plan scores look at the relative strength of a plan. By collecting the plan scores of all the plans in your book of business, you can come up with an average plan score for your clients. Comparing a lead’s low plan score to your “book of business score” is a great use of plan scores. Such a comparison is a data-driven reason for the sponsor to consider having you perform the same great work you did for your other clients.

THE JDA ADVANTAGE: With our monthly updates, you will always have the most recent data available. Quickly knowing that a plan is in trouble, and who to reach out to will give you a better chance of locating a floundering plan before its advisor is aware something is wrong.

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10 Terms You Need to Know (to Understand the 5500)
January 21, 2019

If you are new to the market and the 5500, there are likely to be a ton of terms that you may be unfamiliar. Before you dig too deep into your 5500 research, review the below ten terms. Whether you are in the retirement or group insurance market, studying the below terms will help you prepare for prospecting.

1. ERISA

The Employee Retirement Income Security Act of 1974. This law sets minimum standards for most voluntary health and retirement plans offered in the private sector. Yearly completion of the Form 5500 is one part of this law.

2. Sponsor

A Sponsor is a company that provides a retirement plan to their employees

3. Provider

A provider is a company or agent who services a retirement plan for the sponsor. These services can be anything from investment management, to recordkeeping, to third-party administration. You can view the providers for a plan on the Schedule C of the 5500, where you’ll find information on the company, services provided, and the compensation they’re required to disclose.

4. Participant

An employee of a plan who is part of a plan. They may be active or retired.

5. Plan Number

Each ERISA qualified plan is assigned a three-digit plan number. Together with an Employer Identification Number (EIN) and Plan Year, a specific plan may be identified. Plan numbers from 001 to 500 are Retirement plans. Plan numbers from 501 and 999 are Health and Welfare plans. A Plan number provides no other additional data.

6. Plan Year

This is the year of which the plan covers. For instance is a plan’s term runs from January 1, 2017, to December 31, 2017, the Plan Year is 2017. Much like an individual’s income tax filings, these forms are submitted yearly for the previous year. As a sponsor has 201 days to file a 5500, and they may apply for a two-month extension, a 5500 may be made available to the public up to 10 months after the plan renews.

7. Plan Type

Plan types on the 5500 are indicated by a code consisting of a number and a letter and denote the features of a plan. This could cover anything from whether a plan is a defined benefit or defined contribution plan, whether a plan is a 401(k) plan, 403(b) plan, etc., and other features of the plan like having automatic enrollment and allowing participant directed accounts. It is not uncommon for retirement plans to have several of these plan type codes listed, and understanding them is key to understanding the structure of a retirement plan.

8. Defined Benefit

A defined benefit plan are employer-sponsored retirement plans where the retirement Benefits owed are calculated using a variety of factors such as length of employment and compensation history. They more commonly referred to as pension plans. The company invests in a pension fund and pays the retirees their benefits out of that fund. Defined benefit plans used to be the more popular type of retirement plan, but 401(k)s and other defined contribution plans have swiftly become the preferred choice for retirement plan sponsors.

9. Defined Contribution

A defined contribution plan is a retirement plan paid for in contributions directly from the employee’s pay, instead of the employer. These contributions are typically tax-deferred and employers generally choose to match varying percentages of employee contributions. While the benefit from a pension plan is precalculated, and the employer is on the hook for that amount no matter what, defined contribution plan benefits ultimately depend on the level of employee contributions and the rate of return on the investments made by the plan.

10. Corrective Distribution

Every year a plan’s participant may contribute up to $18,500 into their 401(k) plan. Contributions above this amount are not allowed by the IRS. When a participant, often a Highly Compensated Employee (HCE) contributes over this amount, this overage must be corrected.

 

THE JUDY DIAMOND ADVANTAGE

Now that you are more familiar with these foundational terms, put them to use looking at some 5500s. You can find 5500s either of Judy Diamond Associate’s sites, FreeERISA and Retirement Plan Prospector.

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Prospecting the Federal Form 5500 – Finding Your Target
January 14, 2019

Using 5500 Data for Offensive and Defense Business Development (Part 2): Finding Your Target

Now that the east coast is covered in snow, it’s the perfect time to continue my series on Prospecting the Federal Form 5500, this time focusing on how to find the targets you identified in the first post of this series.

With hundreds of thousands of plans out there, it can be hard to find those plans that are right for you to reach out to. Instead of spending time, effort, and even money contacting leads with little chance of conversation, you need to focus your attention on leads that would be more receptive to your approach.

WHAT ARE RED FLAGS?

Red flags are a series of indicators the experts at Judy Diamond Associates identified to aid in locating “in trouble” plans. These red flags not only identify a potential issue in a plan, they also act as tags which can be searched for. Which 19 separate Red Flags to choose from, it is easy to tailor one’s research. Included in our red flags are:

  • High Average Account Balance
  • Corrective Distribution Issued
  • Insufficient Fidelity Bond Coverage
  • Highest Admin Fees

For more on our red flags, check out Michael Iapalucci’s outstanding new series focusing on our Judy Diamond Associate’s red flags.

PLAN SCORES

Knowing how a plan stacks up against other plans in a state or industry can be critical in identifying trends in your market. Therefore, having access to tools that quickly aid in plan comparison is a must! Plan scores provide you with seven metrics by which a plan can be compared to other plans. Additionally, JDA includes an overall umbrella score for a more high-level analysis. These scores help you understand the landscape around the plan so that you are better able to develop your pitch, or guide your business development efforts.

ADVANCED SEARCH

Now that you know what your current clients look like, you can use the advanced search feature to find other companies that match! This may seem a challenge since there are over 450 fields of data in a 5500 form. There are many options including Participant or Asset Total, to specific Red Flags, to Broker or Vendor Names. However, the advanced search box allows you to quickly narrow the field of leads from hundreds of thousands to a more manageable number of perfect leads.

PERFORMANCE BENCHMARKING

Knowing how a plan performs against other plans very helpful. It is a good idea to research a plan to determine if they really are a good lead for you. Performance-based benchmarking is a great way to accomplish this. Identifying a plan that historically underperforms plans in your region or your own book of business helps you focus your attention.

 

THE JDA ADVANTAGE:

These are just a few of the tools within Retirement Plan Prospector Prospector Plus tool designed to bring the experience of the JDA Team to your office. These tools are easy to learn, quick to use, and, most importantly, they provide results. There is a reason our clients stay with us year after year.

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Prospecting the Federal Form 5500 – Identifying your Client
December 17, 2018

Using 5500 Data for Offensive and Defense Business Development (Part 1)

This article is the first in a five-part series devoted to helping you more effectively use the 5500 for prospecting. By the end of this series, you will learn:

  • Steps to locate viable new business
  • Defense strategies for your book of business
  • How to approach your first meeting with a potential client

Identify your Clients

There are over 1 million ERISA qualified plans active nationwide each year. Nearly 800,000 plans in the retirement space alone. Finding the plans that fit well into your business model can seem like a daunting task. The first step in business development is often research. Here are 3 questions to ask yourself:

Who Are My Current Clients?

Knowing who you currently work with is a great indicator of where you should be looking for new business. Consequently, as no one knows your client’s as well as you, it is always a good idea to dig deeper and see if there are unifying traits that you may not be aware of. The 5500 form provides a ton of information that, when analyzed, can reveal trends and traits that may not have been uncovered by your face-to-face interactions.

What Are My Strengths?

Properly identifying your skill set is imperative when planning your prospecting. Perhaps you are a good educator and skilled at letting employees know the value of their plan. Maybe you are a data wonk and are skilled at identifying trends in large pools of data. You may have spent years in the 401(k) market and are known in your region for strong 401(k) performance.

Who Looks Like My Current Customers?

A good place to start are those categories of sponsors that are similar to what you work with and blend well with your strengths. Therefore, if you can find sponsors who resemble your client base, sponsors that also may have an unhealthy plan, you have yourself a beginning of a great lead list.

THE JDA ADVANTAGE:

The Retirement Plan Prospector database was designed not only as a lead generation service but as a tool to help you identify trends in large datasets.

 

Find the second post in this series Here!

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