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.

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