8 good reasons to call every client for a year-end review.
by rick telberg
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thanks to the tax cuts & jobs act, the 2018 tax year has been unlike any other. cpas and tax preparers have been busy helping clients make, or think about making, a new menu of possible adjustments to their financial plans.
the questions started coming in even before the act was passed into law, and they haven’t stopped. in fact, as the end of the year approaches, the pleas for counsel are accelerating, according to a new survey.
the survey, conducted by the aicpa personal financial planning section, finds several key issues of most concern to clients:
- 50 percent of survey respondents report changes in charitable giving.
- 49 percent report changing their business structure.
- 42 percent report changes in estate planning.
- 32 percent report adjustments to retirement savings.
- 27 percent report effects on housing decisions, such as home equity loans and lines of credit.
life events
the biggest driver of changes to financial plans, however, has nothing to do with tax reform. rather, the changes are driven by major life events, such as marriage, divorce, death, retirement, etc. only six percent of changes to financial plans result from the tcja, while a staggering 77 percent attribute the changes to life events.
the tax reforms are also driving certain major life events. with the elimination of the alimony payment deduction, 27 percent of cpa financial planners say clients are trying to finalize their divorces by the end of 2018. six percent of those financial planners saw a “substantial” increase in fast-tracked divorces. nationally speaking, the loss of the deduction could add up to real money. last year, the nation’s alimony deductions totaled $12.3 billion.
the best advice
the tcja changes are a good reason for every tax preparer and financial planner to call every client into the office for a year-end review. big decisions need to be made before dec. 31.
what’s the best advice for clients scrambling to minimize their taxes this year?
here are some options to consider:
- clients torn between standard and itemized deductions might consider bunching their charitable contributions into alternate years so they can take the standard deduction one year, then itemize the next year.
- clients should reduce their estate tax exposure by giving up to $15,000 to beneficiaries before the end of the year or before dying, whichever comes first.
- astute investors should use the recent market plunge to harvest tax losses to balance the year’s earlier gains.
- clients can donate appreciated stock to charitable causes, taking the full market value of publicly traded stock without recognizing the gain.
- with attention to end-of-year deadlines (as opposed to april 15), clients need to be reminded how to maximize contributions to all retirement plans, to match 401(k) opportunities, and to make all possible 529 plan contributions.
- clients should be reminded to spend down funds from flexible spending accounts before they are lost at the end-of-year deadline.
- employed individuals should update w-4 withholding if it has changed.
- select clients should be encouraged to prepare to celebrate their divorce on new year’s eve.