Last tax season was a mess. Now’s time to prepare again: Tax Strategy Scan

Register now

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

Last tax season was a mess. Now’s time to prepare for this one.
Clients who failed to adjust their withholdings and think their currently withheld amount is not enough to cover their tax liability can avoid the added burden by using the rest of the year to raise the amount withheld from their final salary, according to this article in The New York Times. This means these clients will have to fill out a W-4 now or make an estimated tax payment directly to the IRS. “You can start planning for that now by setting aside money in savings accounts or planning ahead for an installment agreement with the IRS so you can pay over a period of time,” according to an expert.

10 surprising things that are taxable
Many clients are unaware that the extra cash they receive from various sources can be subject to income taxes, according to this article in Kiplinger. For example, scholarships, gambling winnings, cancelled debt and buried treasure are considered taxable income and should be declared on their tax returns. Clients will also owe income taxes on stolen property, gifts from employer, bitcoin earnings and cash earned from a property or services through a barter exchange.

7 ways to cut clients' tax bills before Dec. 31
There are several ways for clients to reduce their tax burden before the year ends, this article in CNBC reports. For one, clients must review their tax withholdings to ensure the amount is enough to cover their tax bill, according to the article. They should also increase pretax contributions to their retirement accounts, harvest tax losses to offset their taxable gains and make charitable donations. Accelerating college tuition before Jan. 1 and funding a 529 plan are also last-minute strategies to maximize education-related tax benefits. Clients with special needs and their families may also get state tax deductions for their contributions to ABLE accounts.

Ways to boost clients' refunds with itemized deductions
Although the standard deduction increased under the new tax law, clients are advised to run the numbers to see if they will save more on taxes by itemizing deductions on their returns, according to this article in Yahoo Finance. Aside from the tax deduction for home mortgage interest payments, clients can also deduct their medical expenses, charitable contributions and casualty losses. They can claim tax deductions for loan origination fees for a home purchase, state and local income taxes and personal property taxes on the value of their vehicle or boat.

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

Know the rules before rolling over a client's pension
Workers who consider taking a lump-sum distribution from a pension and rolling the money over to a retirement plan need to be familiar with the IRS rules, writes a Forbes contributor. For example, they have to do the rollover to a tax-advantaged account within 60 days since they receive the lump-sum payment, he says. Workers won't owe taxes on the rollover to a traditional retirement account, but will face a tax bill for rolling the money to a Roth account.

For reprint and licensing requests for this article, click here.
Trump tax plan Tax planning Tax forms Tax deductions Pensions IRS Tax liabilities
MORE FROM FINANCIAL PLANNING