Financial advisors need to take extra precautions in advising clients on taxes at the end of this year because of current world events that will affect individual planning, says an advisor whose practice combines tax planning and overall financial planning.
Advisor Theodore J. Sarenski, who holds the CPA/PFS designation, says world political and health issues should be taken into account when advisors talk with clients about end-of-the-year tax issues.
“Ebola may seem far away, but if the situation gets worse, the disease will have an impact on travel that could slow the economy,” says Sarenski, president and CEO of Blue Ocean Strategic Capital, an RIA in Syracuse, N.Y.
Likewise, if action by the Federal Reserve next year forces interest rates up, consumers may refrain from buying big-ticket items, which also would slow the economy.
A slowing economy means less money for the government and could mean increases in taxes that advisors should be prepared for.
“If you and your advisor think taxes will go up next year, you may want to push more income into this year to take advantage of the existing tax rates,” Sarenski says.
Congress also is still considering the extension of a host of tax deductions that will expire if it does not act by the end of the year. There is no way of knowing now which deductions will be continued and which will fall by the wayside, he says.
“We used to look two years ahead in planning our clients’ tax liabilities,” says Sarenski, “but now we try to look five to 10 years out. All advisors need to realize long-term planning is more difficult today, but more necessary.”