Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Taxable accounts, often used to fund nonretirement goals and meet a variety of objectives like down payments for homes, family vacations and purchasing new cars, should not be tied up in a retirement account, according to Morningstar.
These portfolios, the research firm says, are meant for short- and intermediate-term investing and should carry enough risk to grow and meet the goals in time. Clients should ensure that these portfolios are tax-efficient in order to help reduce costs and enhance overall returns. — Morningstar
Fifteen tax planning tips from analysts and industry experts advisers may consider in 2017.
Clients owe no taxes on rewards for opening and using credit cards, as these incentives are considered a discount and are not taxable income by the IRS, according to this article from Nasdaq. However, they face a tax liability for checking and savings account signup bonuses as the IRS treats the rewards as taxable income. Clients can expect 1099s from banks at which they opened these deposit accounts. — Nasdaq
As many taxpayers are expected to receive a refund during the tax season, clients may want to maximize the windfall by planning on how they intend to spend the money, according to this Yahoo Finance article. They may want to use the refund to open an emergency fund or contribute the cash to a retirement savings vehicle. Clients may also put the money to good use by spending it on work-related classes and activities for self-improvement. — Yahoo Finance
Many clients have misconceptions that keep them from contributing to an IRA, according to this MarketWatch article. For example, it is wrong to think that they are not allowed to contribute to a 401(k), a Roth IRA and a traditional IRA in the same year. It is also a mistake to think that clients cannot contribute to an IRA if they are earning too much, or that the account is no longer valuable if they can only make nondeductible contributions.
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Now harsh penalties and taxes on late 60-day rollovers from company plans and IRAs can be avoided, but beware: There are some rollover mistakes that still cannot be fixed.
September 22 -
Some advisers and their clients are running afoul of an IRS rule, and oversights can result in substantial penalties.
June 22 -
There’s one goof every adviser should take extra precautions to avoid: being careless about those IRA beneficiary forms.
August 8
Clients should know that nonworking spouses can contribute to a spousal IRA, while IRA owners can make early withdrawals without facing any penalties for certain purposes, such as the purchase of first home. It should also be noted that clients have until the end of the tax season to make contributions for the past year. — MarketWatch
