IRS rules clients must know before amending tax returns: Tax Strategy Scan

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Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

What clients must know about amending their federal tax returns
Advisors are tasked with keeping their clients informed on the nuances of IRS rules prior to amending any federal tax returns, as this option is not as simple as filing Form 1040X, according to this article in The Wall Street Journal. Amending a federal income tax return depends on personal tax circumstances, “such as the materiality of the error, whether the error was the result of fraud or criminal activity, whether the IRS has already started an audit or investigation of the taxpayer, and numerous other considerations,” according to a lawyer.

How much tax will my client owe on Social Security benefits?
Retired clients who want to know if their Social Security benefits are subject to income taxes are advised to determine their combined income, according to this Motley Fool article. The collective income is their adjusted gross income plus nontaxable interest and 50% of their annual retirement benefits. Retirees should expect taxation on 50% of their benefits if their combined income is between $25,000 and $34,000 ($32,000-$44,000 for joint filers), while those with more than $34,000 in combined income ($44,000 for joint filers) can see 85% of their benefits to be subject to taxes.

3 smart year-end charitable giving strategies
Taxpayers should consider maximizing their charitable donations before the year's end to boost their deductible expenses and make itemizing deductions more valuable than the standard deduction, a Forbes contributor writes. To do this, clients should donate assets that have appreciated in value or consider bunching years' worth of donations into a single year. Retirees also have the option of donating their RMD directly to charity through a qualified charitable distribution, as this will enable them to avoid taxation on the mandatory withdrawal.

What to do if someone files a fraudulent tax return in your client’s name
To avoid falling victim to scammers filing fraudulent tax returns in their name, clients are advised to take the necessary precautions, according to this Yahoo Finance article. To protect themselves from fraudsters, taxpayers are advised to update their passwords, stay up-to-date on trending scams and avoid carrying their Social Security card or number. They should use secure channels when sending sensitive personal information, file their returns as early as possible and enlist the help of reputable tax preparers.

Pro tips for cutting tax bills in the final weeks of 2019
Clients who own a business may be eligible for a 20% deduction as a result of tax overhaul. For those who don’t qualify, there are other savvy strategies

The clock is ticking on these last-minute tax breaks for 2019
There are a few moves that clients can make to enhance their tax savings before the year ends, according to this CNBC article. For example, clients can make pretax retirement contributions to reduce their taxable income, while they can buy a new electric vehicle and qualify for a tax credit. They can also accelerate their education-related expenses before Dec. 31 and claim the lifetime learning tax credit on their 2019 returns. Those who intend to itemize tax deductions can boost their medical expenses and charitable donations.

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IRS Tax returns Social Security Charitable deductions Tax breaks RMDs Retirement planning