Help clients get a jump on tax season

November 27, 2018 11:24 AM

Tax season is approaching fast — it’s almost time to shift from year-end planning strategies to preparing for filing. The season looks like it will kick-off around its usual time of mid-January.

While financial advisors often tout the advantages of connecting clients with tax professionals, it would behoove planners to be well versed in general tax subjects to answer client questions.

With that in mind, consider this collection of tips from the IRS and other tax experts on how clients and advisors can set themselves up to have a smoother, less surprising filing season in 2019.

Dig up last year’s return

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Key information from 2018 returns will be needed for filing in 2019.

The IRS recommends keeping a copy of tax returns and supporting documents for at least the three previous years.

For instance, clients using tax filing software for the first time may need to provide last year’s adjusted gross income to verify their identity. Advisors and clients can learn more about this by visiting Validating Your Electronically Filed Tax Return.

For clients who claim certain securities or debt losses, the service recommends keeping returns and documents for at least seven years.

Get a transcript if necessary

Transcripts summarize tax return information and include the taxpayer’s AGI.

They’re free and available for the past three tax years — but they take at least five to 10 days to arrive if ordered online or by phone. They can take as much as 30 days if ordered by mail.

Clients can end up waiting 75 days for full tax returns, which can cost $50 per copy.

Clients can order their transcripts online by calling (800) 908-9946 or by mail.

Planning around refunds

Department of the Treasury Envelope with Money Inside Isolated on White Background.

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Most of the IRS advice around refunds amounts to reminding taxpayers not to count on it.

Refunds on returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit, for instance, cannot by law be issued before mid-February.

More broadly, precautions instituted by the IRS and its Security Summit partners to combat tax-related identity theft may delay refunds.

Potential delays and changes related to the recent tax overhaul may lead to taxpayers getting less of a refund than they expected. This means clients shouldn't hold their breath while waiting on a return to arrive by a certain date.

Keep an eye out for the new 1040

The current 1040, 1040-A and 1040-EZ are all being replaced by a single, shorter 1040 this year, which can be supplemented by up to six extra schedules.

Those who file their own taxes electronically will need to validate their electronic return with their prior-year AGI, as noted above, or their prior-year Self-Select PIN. (Their AGI would be on Line 37 of last year’s 1040, Line 21 of the 1040-A and Line 4 of the 1040-EZ.)

Don’t give up on year-end planning

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There is still a little over a month left of 2018 and while it’s time to start thinking about the filing process, it’s not too late for some last-minute adjustments.

To start, don’t let clients forget about the usual blocking and tackling in areas like tax-loss harvesting and maximizing contributions to 401(k) plans and other retirement and savings accounts.

Also keep in mind that there are plenty of parts of the tax overhaul to dig into, like planning around the new standard deduction.