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IRS' new Form W-4 and what clients should know: Tax Strategy Scan

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

IRS releases new tax withholding form. Here’s what clients need to know
The IRS’ draft of its new Form W-4 reflects the changes brought on by the new tax law and will be used for next year, according to this article on CNBC. The agency is now accepting public comments on the new form, through July 1. ”If you want to get the withholding right, it will work like the tax return itself,” an expert says. “There will be input areas that look more like a 1040 summary than the old Form W-4.” With the new form, the IRS is asking clients to account for multiple jobs within a household, claim their dependents and factor in the $2,000 child tax credit for each child under 17 or the $500 credit for qualifying dependents.

Implementation of videoconferencing is intended to serve taxpayers virtually via computers or mobile devices, explains Donna Hansberry, chief of IRS appeals.
The reflection of a pedestrian is seen walking past an Internal Revenue Service (IRS) office building in the East Harlem neighborhood of New York, U.S., on Saturday, June 24, 2017. The IRS online registration system for social welfare organizations will be updated to streamline the payment process, by combining the application and payment fee. Photographer: Timothy Fadek/Bloomberg

Selling an inherited house to a relative will affect tax treatment
Adult children who inherit a house from a deceased parent may not qualify for taking a capital loss if they opt to sell the property to a sibling at a price lower than the appraised value, according to this Q&A with a CFP from the Los Angeles Times. “The law is not entirely clear on this topic with the IRS perhaps taking a more severe stand than the tax court, but both seem to frown on any use of the real estate for personal purposes after the death of the parent,” says an expert with Wolters Kluwer.

IRS raises 2020 HSA contribution limits
The IRS announced that the contribution limits for HSAs will be raised next year to $3,550 for clients with self-only coverage under a high-deductible plan and $7,100 for family coverage under a high-deductible plan, according to this article on Bankrate. Clients with high-deductible health plans should make the most of their HSAs, as it offers a tax deduction for the contributions, tax-free growth on investments and tax-exempt withdrawals when the money will be used for qualified medical expenses.

Create a tax-efficient withdrawal strategy for retirement accounts
Clients should identify their cash flows and other related costs when developing a tax-efficient strategy for drawing from their retirement accounts, according to an expert in this article on TheStreet. They should also sequence the withdrawals based on the tax treatment of their retirement accounts to minimize the tax bite. For example, they should dip into their traditional IRA and do Roth conversions when they are in a lower tax bracket. Clients should also hold tax-inefficient assets in tax-advantaged accounts and tax-efficient assets in taxable accounts.

The average expense ratio among the top-performers is 40 basis points higher than the average.
April 9

5 key tax questions when clients are responsible for a loved one’s estate
Clients should know the responsibilities in case they are named executor for an estate after the owner dies, writes an expert on MarketWatch. “The executor’s assignment is to identify the estate’s assets, pay off the debts, and distribute the remainder to the rightful heirs and beneficiaries,” writes the expert. “The executor is also responsible for filing any necessary tax returns and arranging to pay any taxes.”

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