Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Harvesting losses for tax purposes can be a good strategy to save on taxes, but this option will not work for all investors, according to this article on The Wall Street Journal. For example, this strategy only applies to investments held in taxable, not tax-favored retirement accounts. “I think there’s real value in tax-loss harvesting but it’s a timing thing,” an expert says. “It’s good, but it’s not necessarily as good as these guys say it is for most people.”
An IRS report shows Americans have received an average tax refund of $2,873 so far this year, and clients, an expert on CNBC says, should use this windfall wisely. One smart move is to use the refund to pay down bad debt. They can also sock away the money in their emergency accounts or save the funds in their retirement savings vehicles.
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Errors are regrettably common. They are also easily avoidable.
April 1 -
Military families can use one of these provisions to seriously cut their tax burden. Plus, can clients make an IRA contribution on behalf of a deceased person?
October 23 -
Financial planners don’t have to be attorneys to help clients avoid high cost oversights
December 24
Clients face about 25% reduction in taxes this year, with average refund increasing by 1.4%, according to data from H&R Block in this MarketWatch article. The findings could be attributed to a majority of taxpayers not adjusting their W-4 forms for 2018. Taxpayers in New Jersey saw the heftiest decline in tax bills, at 29.1%, followed by Massachusetts (27.6%) and California (27.1%), data show.
Clients who want to move funds from an IRA to another IRA should avoid doing multiple rollovers in a single year, as the IRS has a rule limiting only one IRA rollover, annually, according to this article on Morningstar. One strategy to avoid the once-per-year limit on IRA-to-IRA rollovers is to do a direct IRA transfer from another IRA or other similar retirement account. The rule also does not apply to first-time homebuyers, restorative payments and distributions resulting from financial institution error.
They’re rare, but terrifying. Bear these points in mind when you or your clients face a tax exam.
Clients who own a business and want to reduce the tax bite on their income this year should consider buying capital equipment, as the purchase is tax-deductible, according to this article on Inc.com. They should also contribute the maximum amount to their tax-deferred retirement plans, cover their employees' higher education expenses, which are also deductible, and make the most of the Work Opportunity Tax Credit and the research and development tax credit. Business owners can also increase or decrease their tax estimates depending on how their business is doing.
