When should your clients file their taxes? Tax Strategy Scan

Clients should consider new strategies to reduce their tax bill as there is no guarantee that the Trump administration’s proposal will receive approval from Congress.
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Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

Should your clients wait to file their taxes?
Although taxpayers have until July 15 to file their returns, clients who are expecting a refund are advised to file as early as they can to receive the windfall, according to this article in The New York Times. “If you’re due a refund, you might as well file as quickly as you can,” an expert says. Also to consider is the federal stimulus check and whether your clients qualify for part of the relief package passed by Congress in response to the economic hit from the coronavirus, according to the article. Cash-strapped clients may consider waiting until the new tax deadline to pay their taxes or to request a payment plan to buy more time to settle the tax bill, according to the article.

Can retirees just leave their money invested to ride out the coronavirus downturn?
The CARES Act allows retirees to postpone RMDs from their traditional retirement accounts, and they should seize this opportunity especially if they have other sources of income, according to this article in Motley Fool. By deferring the mandatory distributions during the downturn, retirees will avoid locking in losses and paying income taxes on the withdrawals. Retirees who need to take the RMDs may also have to reduce their spending to minimize their dependence on the distributions for income.

Donate to charity and cut your tax bill
There are strategies clients should consider in order to maximize their charitable donations and boost their tax savings, according to this article in Kiplinger. For example, they can bunch years' worth of donations into a single year, use a donor-advised fund or donate stocks that have appreciated in value, according to the article. Retirees who have to take mandatory distributions from their IRAs have the option of donating the funds directly to charity and avoid paying the income taxes.

Even as they still have to deal with tax season, the service is tasked with handling much of the stimulus packages.
April 6

Potential tax traps of the SECURE Act
Clients are advised to review certain provisions of the SECURE Act, as these changes could be potential tax traps, according to this article in TheStreet. For starters, the elimination of the stretch IRA under the law should prompt investors to review their conduit trusts, an expert says. "Without careful, comprehensive planning to realign goals within the act's paradigm, there is a significant risk that a large percentage of our clients' net worth could be taxed at the maximum income tax rate."

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Tax refunds Coronavirus Philanthropy IRAs Roth IRAs RMDs