Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Rather than focusing on New Year's resolutions, clients should consider addressing their taxes to avoid costly troubles with the IRS and boost their savings at tax time, writes a Forbes contributor. “Most tax planning involves timing. You usually want to accelerate tax deductions, but to defer paying taxes when you can,” the expert writes. "Keep records and watch the statute of limitations. The usual IRS statute of limitations is three years after you file your tax return."
Clients are advised to start planning for the 2020 tax season to improve their tax-filing results, according to this CNBC article. When planning, they should review and maximize their retirement contributions, organize their tax and financial documents and run the numbers to determine whether they will save more by itemizing deductions than by opting for the standard deduction. They should also account for the impact of major life events on their finances and consider adjusting their tax withholding.
Clients can expect sizeable tax benefits that may boost their savings next year, according to this article in Motley Fool. For example, workers won't owe taxes on their employer-sponsored health insurance, while clients in lower tax brackets can see zero or minimal tax bite on dividends and long-term capital gains. Other significant tax benefits that await clients next year are child tax credits and pretax treatments of 401(k) and pension plan contributions.
To help individuals and businesses prepare for filing season, Grant Thornton has released a collection of year-end tax tips.
Saving in a tax-advantaged 529 plan affords parents some flexibility when preparing financially for their children's education, although they will owe a tax penalty on non-qualified withdrawals from the plan, according to this Kiplinger article. Parents who are looking for an alternative to a 529 plan may opt for a brokerage account earmarked for their child's college expenses. Setting up a trust or custodial accounts also offer parents greater control over the funds.
Criticisms of the Free File Alliance prompted the IRS to revamp the public-private partnership that offers free tax preparation to millions of American taxpayers, according to this article in The Wall Street Journal. With the new agreement, the IRS hopes to enhance their program for the benefit of tax filers, says IRS Commissioner Chuck Rettig. “The improved process will make Free File stronger and give taxpayers another reason to consider this valuable software option.”
