Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Taxpayers are advised to file their returns as soon as possible to receive an early refund and avoid falling victim to identity theft, according to an expert in this Kiplinger article. “What these scammers do is they steal social security numbers. They file fake tax returns in your name and claim your refund,” an expert says. “[I]f you file your taxes and you claimed your refund they can't take it from you. They can't. They'll file a fake return and it'll just bounce right back.”
Clients who want to boost their savings on their tax returns should consider setting up a traditional IRA and make deductible contributions, according to this article on Motley Fool. They have until April 15 to make 2018 contributions to the account and claim the tax break on their returns. The contributions can help lower the taxable income, and IRAs could claim the tax break whether they itemize or opt for the standard deduction, as the break is treated as an above-the-line deduction.
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Advisors should contact every client who did a Roth conversion in 2017 to discuss a key change in tax regulations, Ed Slott says.
December 4 - FP magazine
It’s the Roth’s 20th birthday. Where is everyone?
November 20 -
IRA balances are up, and so are divorces, particularly among baby boomers. These so-called gray divorces have roughly doubled over the past 25 years, according to the Pew Research Center.
August 31
Retirees can expect changes to their 2018 tax returns thanks to the reforms under the Tax Cuts and Jobs Act, an expert on TheStreet writes. For example, seniors are more likely to opt for the standard deduction, which increased under the new law, but those who want to maximize the tax deductions for charitable giving should consider “bunching” their years’ worth of donations in a single year, the expert writes. “Full retirement age taxpayers who were investing in tax-free municipal bonds and who just started collecting Social Security last year might be in for a surprise when filling out their 2018 tax return.”
Small business owners should check whether they qualify for the qualified business income deduction and claim the tax break on their 2018 returns, according to this article on CNBC. Created under the new law, this tax break will enable them to save 20% of their pass-through income. However, knowing who qualifies for the tax deduction can be challenging, as the regulations are still unclear. “I think overall, the IRS did a great job of clarifying things, but there are still open and unanswered questions that I think need to be addressed further through other guidance," a CPA says.
What some clients tried to claim on their tax returns shows they often don't know much about accounting.
Clients who want to save on taxes have until April 15 to make 2018 deductible contributions to an IRA, according to this article on Barron’s. Retirement investors who expect to move to a lower tax bracket in retirement should sock away the money in a traditional IRA, while those who think that their tax bracket will be higher after they retire should direct the money to a Roth IRA. “It’s a hedge that allows you to manage your tax brackets on both the deduction side and when taking distributions,” an expert says.
