Tax tips for last-minute filing: Tax Strategy Scan
Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Tax tips for last-minute filing
As the tax-filing deadline draws near, clients who need more time to prepare their taxes should consider an extension until Oct. 15 to avoid putting themselves through a stressful situation, according to this article on Kiplinger. The IRS will hold on to their tax refund until they can file their returns. However, those who owe the IRS should ensure that they pay their taxes by April 15 even if they have already secured an extension to avoid penalties plus interest on the dues.
Side hustle or hobby? Know the difference to avoid issues with the IRS
Clients who have a side hustle should ensure that the IRS considers it a business and not a hobby, according to this article on The Washington Post. That’s because while income from business and hobby is taxable, clients can claim a tax deduction only for business losses. “Make sure that the IRS will consider your endeavor a real business before you start claiming deductions for the costs of your art projects or toy car collection,” according to an expert.
The law now creates a different method of caring for relatives while preserving the family’s financial plan, a John Hancock associate counsel writes.
For example, taxpayers should not panic about the new cap on state and local tax deductions.
Too high a tax bill for 2018? Here's how to lower your 2019 taxes
Clients who owed the IRS a hefty tax bill for 2018 can minimize the tax bite this year by maxing out deductible contributions to their retirement plans, according to this article on Motley Fool. They should also consider setting up a health savings account and a flexible spending account, which are also funded with pretax dollars. Investors sitting on depreciated investments can sell these assets and use the losses to offset taxable capital gains and trim their tax bill.
There's still time to make this move to lower your clients' taxes
Clients who have yet to file their taxes can still make a last-minute move to minimize their tax bill, according to this article on Money. They have until April 15 to make 2018 pretax contributions to their traditional IRAs and reduce their taxable income for the year. “It’s one of the only things you can do up until the 2018 tax deadline that can lower the amount of taxes you owe,” a CPA says.
How to pay less in taxes with smart investment decisions
Clients can minimize their tax burden with tax-advantaged IRAs and employer’s matching contributions in their 401(k) plans, according to this article on Arizona Republic. They should also consider investing in municipal bonds, which offer tax-exempt yields. While clients will owe taxes on dividends from stocks held in taxable accounts, they can delay capital gains by deferring the sale of these investments and use losses to write off taxable income.