The changes brought on by coronavirus-related relief should figure big in wealthy clients’ midyear tax planning, especially regarding retirement money and business ownership.

“This year it’s more important than ever to give special attention to tax-planning strategies that’s available through all of the recent tax acts,” said said John Vento, a CPA/CFP in New York with Avantax Investment Services and Avantax Advisory Services.

“If there’s a planning technique that makes sense for a taxpayer, I recommend implementing it now,” said Kathy Buchs, CPA, director at MAI Capital Management in Cleveland. “It’s also possible that if the current administration doesn’t remain after the November elections, taxes could increase in 2021.”

“This is not a year to wait until the third quarter to just do year-end planning,” added Jeffery Neher, an Avantax Wealth Management advisor in Wenatchee, Wash. “Decisions need to be made.”

For example, under the new The Setting Every Community Up for Retirement Enhancement (SECURE) Act, required minimum distributions (RMDs) are no longer mandated until the year in which the owner turns 72, said Craig Richards, director of tax services at Fiduciary Trust International in New York. “If [you're] younger than 72 and you don’t need the funds, hold off on distributions,” he said. “If you do need funds, consider more tax-efficient sources, like first selling securities with minimal or no built-in gain.”

“This can be a significant tax savings as elderly high-net-worth clients would not have to take money out of their investment accounts and pay taxes on those distributions, allowing the investments to grow for another year,” said Joe Rubenstein, CPA, senior manager with Froehling Anderson in Minneapolis.

Clients can also continue contributing to an IRA beyond 70½ if they still have earned income. “If you took your RMD between February 1 and May 15, you can reverse the distribution and put the funds back in your IRA by July 15,” Richards said.

Retirement accounts figure in another big technique for midyear planning: the Roth conversion, which incurs a tax bill now but can save taxes in the future. “They’ve been around a long time, but they have particular relevance when considering a change in income tax rates and have become more attractive post-SECURE Act,” said Joe Roberts, senior vice president and senior wealth strategist at Rockefeller Capital Management in Philadelphia.

Under SECURE, a 10-year payout period will still apply to Roth beneficiaries, but no taxes will be due on a distribution from Roth accounts.

“There are a number of advantages and disadvantages associated with Roth conversions, and clients must ask if they’re willing to prepay taxes today knowing it can take about 15 to 20 years before they break even and will start to reap the benefits of those pre-payments,” said Jared Feldman, CPA, partner and leader of the private client group at the accounting firm Anchin in New York.

In a whipsawing stock market, conversions can also be partial. “Values of various positions in an account may be lower than before Covid-19 because of the decline in the market,” said Kim Bourne, CPA/CFP, CEO and founder of Playfair Planning Services in New York. “Specific securities can be converted.”

Clients need to be readied to make a conversion should the market dip deeply again, Neher added.

Clients who own businesses need to know that the $500,000 limit on claiming a business loss ($250,000 for single taxpayers) in a single tax year has been removed. “Now any amount of business loss can be applied in 2020,” Bourne said. “Another tax law change is on how a net operating loss is counted. Business owners can now look back five years. Examine previous years’ returns and count those losses.”

Looks back might also be needed after the Coronavirus Aid, Relief and Economic Security (CARES) Act fixed a drafting error from 2017 tax reform that omitted qualified improvement property from the list of property with a 15-year life, Rubenstein said. CARES also removed the limitation for excess business losses for 2018 through 2020, possibly creating business net operating losses that can now be carried back to previous years, and eased the limit of interest expense. And “taking advantage of the Section 199A deduction for qualified business income should be on the front of every business owner’s mind,” Rubenstein added. 

Do your clients have to make decisions right now? What if more relief is coming? “Planning should be ongoing throughout the year, even in these times,” Rubenstein said. “Waiting for more tax relief is not a good idea—there’s no guarantee that more help is on the way.”