February 2019 • Jeff Stimpson
In the wake of sweeping tax reform, some of your high-net-worth clients will ask about new tactics to trim their 2018 tax bill before filing this April. Those who file closer to the deadline may be particularly eager for answers. What other moves remain useful—and still possible—after tax reform? “The biggest fear that most late filers will have this year is whether they’ll owe tax,” says Bruce Primeau, CPA/CFP and president of Summit Wealth Advocates in Prior Lake, Minn. So what’s the biggest question high-net-worth individuals have about filing near the deadline for this tax year? “For clients, it’s a tie between ‘Can I file an extension?’ and ‘Will I owe?’” says Judith Herron, CPA with Markovitz Dugan & Associates in Pittsburgh. “For me, it’s, ‘Did you make those estimated tax payments?’ and ‘Do you have all your K-1s and brokerage statements yet?’” If your wealthy client hasn’t filed yet, he or she isn’t alone. The Internal Revenue Service often receives a late burst of tax filings in the final days of the season. One reason behind a sizable number of late filings is that many taxpayers still await K-1s and other tax forms even as late as February. Last-minute tax filing can be a hassle, but there’s no need to panic if things still aren’t in order as Tax Day draws nigh. Late filers are “crazy not to get an extension” to file, says Martin Abo, CPA with Abo and Company and Abo Cipolla Financial Forensics in Mount Laurel, N.J. This can buy time to glean previously missed deductions. The largest disappearing deduction that applies to clients with a state income tax is the taxes-paid deduction, now capped at just $10,000. “For folks in high-tax states … this hits home the hardest,” Primeau says. He adds that another big loss is the miscellaneous itemized deductions no longer allowed at the federal level. “The charitable deduction is alive and well under the new tax law, but it doesn’t provide the tax break it used to,” Herron warned. “The issue is the higher standard deduction and the cap on state and local taxes. Let’s say you have mortgage interest of $5,000 and max out at $10,000 on the other items. If you gave another $9,000 to charity, you still don’t do better [tax-wise] than if you just take the standard deduction [for couples filing jointly].” Some changes in the Tax Cuts and Jobs Act have actually eased the to-do list of last-minute filing. “Changes were made for 2018 to make less folks subject to the AMT, and this created an opportunity for our clients with stock options to buy and hold some of those options without any AMT impact,” Primeau said. “By implementing a strategy for those people, we are able to cut the tax bill on a portion of those options by 14% to 17%, which in many cases helps us cut their long-term tax bills by tens of thousands.” First « 1 2 » Next
In the wake of sweeping tax reform, some of your high-net-worth clients will ask about new tactics to trim their 2018 tax bill before filing this April. Those who file closer to the deadline may be particularly eager for answers.
What other moves remain useful—and still possible—after tax reform?
“The biggest fear that most late filers will have this year is whether they’ll owe tax,” says Bruce Primeau, CPA/CFP and president of Summit Wealth Advocates in Prior Lake, Minn.
So what’s the biggest question high-net-worth individuals have about filing near the deadline for this tax year? “For clients, it’s a tie between ‘Can I file an extension?’ and ‘Will I owe?’” says Judith Herron, CPA with Markovitz Dugan & Associates in Pittsburgh. “For me, it’s, ‘Did you make those estimated tax payments?’ and ‘Do you have all your K-1s and brokerage statements yet?’”
If your wealthy client hasn’t filed yet, he or she isn’t alone. The Internal Revenue Service often receives a late burst of tax filings in the final days of the season. One reason behind a sizable number of late filings is that many taxpayers still await K-1s and other tax forms even as late as February.
Last-minute tax filing can be a hassle, but there’s no need to panic if things still aren’t in order as Tax Day draws nigh. Late filers are “crazy not to get an extension” to file, says Martin Abo, CPA with Abo and Company and Abo Cipolla Financial Forensics in Mount Laurel, N.J. This can buy time to glean previously missed deductions.
The largest disappearing deduction that applies to clients with a state income tax is the taxes-paid deduction, now capped at just $10,000. “For folks in high-tax states … this hits home the hardest,” Primeau says. He adds that another big loss is the miscellaneous itemized deductions no longer allowed at the federal level.
“The charitable deduction is alive and well under the new tax law, but it doesn’t provide the tax break it used to,” Herron warned. “The issue is the higher standard deduction and the cap on state and local taxes. Let’s say you have mortgage interest of $5,000 and max out at $10,000 on the other items. If you gave another $9,000 to charity, you still don’t do better [tax-wise] than if you just take the standard deduction [for couples filing jointly].”
Some changes in the Tax Cuts and Jobs Act have actually eased the to-do list of last-minute filing. “Changes were made for 2018 to make less folks subject to the AMT, and this created an opportunity for our clients with stock options to buy and hold some of those options without any AMT impact,” Primeau said. “By implementing a strategy for those people, we are able to cut the tax bill on a portion of those options by 14% to 17%, which in many cases helps us cut their long-term tax bills by tens of thousands.”
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