The Financial Advisor’s Guide to Tax Planning Conversations for Every Season
By Ben Birken, CFP®
Tax day might be in mid-April, but tax planning is a process that spans all four seasons – and advisors who can extend tax optimization conversations beyond the spring can provide more value to their clients.
From prepping those returns to finding potential Roth conversions, talking over Social Security income caps and scheduling charitable gifting – there’s a lot of topics to walk through with your clients.
How can you ensure you’re hitting all the points at the most beneficial moments?
We’ve created a helpful guide to help you do just that. With this step-by-step list of tax planning topics separated by the seasons, you can easily keep up with your clients’ needs all year long.
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Spring Tax Planning Topics for Advisors
Ask anyone what comes to mind when they think of spring, and they’ll probably say rainy days, blossoming flowers, and vibrant colors. Ask a financial planner the same question, and you’ll likely get a totally different answer: taxes.
Spring is a big deal for tax planners – and in all the rush surrounding mid-April, you don’t want to miss any big topics as you work with your clients. The three main talking points for the rainy months include:
- Contributions for the previous tax year, such as:
- IRAs/Roth IRAs
- SEP IRAs/Solo 401ks
- Health Savings Accounts (HSAs)
- Tax return prep:
- List out expected tax documents (1099s, K1s, etc.)
- Identify Qualified Charitable Distributions (QCDs) and other tax-related activities performed during the previous year
- Identify any 60-day rollovers that were in process over New Year’s
- Warn on common errors
- Review tax returns and identify planning opportunities for the current year
These three topics will set you and your clients up for a successful year of tax planning and ensure everyone’s on the same page as you move forward into summer.
Summer Tax Planning Topics for Advisors
With tax returns behind most of your clients, they’re probably focused on soaking up the sunshine and taking in a fireworks show around the 4th of July – but even with tax day long gone, there are still some key planning topics to discuss over the summer months.
These conversations should include:
- Estimated taxes – Make sure they’re keeping up on anything they might owe the IRS for next year.
- A review of last year’s returns – What changes do they want to make for next year?
- Cash flow planning – Are there any updated spending assumptions that could impact retirement projections?
Creating a tax game plan earlier can not only free up your schedule in the midst of the year-end rush, it can also ensure your clients’ overall financial goals are on track for the next year.
Fall Tax Planning Topics for Advisors
What’s autumn all about? Between the pumpkin patches and hot apple cider, there’s always more tax planning to do. Fall is a time to put key pieces of your clients’ tax plans into action, such as:
- Assist any clients who requested an extension for the completion and submission of their tax returns, particularly as it might relate to SEP IRA/Solo 401k contributions for self-employed individuals.
- Lower withholding levels to avoid large refunds, or increase to avoid underpayment penalty
- Have they hit the Social Security income cap for FICA deductions? If so, redirect those dollars to savings
- Begin end of year prep. Tee up projection software for tax gain/loss harvesting, charitable giving, Roth conversions, etc.
- Begin having charitable-giving conversations now to avoid year-end rush, particularly if you anticipate opening and contributing to a Donor Advised Fund (DAF)
- Open enrollment – Any HSA opportunities or Flexible Savings Account (FSA) considerations?
The winter is certain to bring in the business of last-minute tax planning tasks, so preparing your clients in the fall can help you get ahead of the rush.
Winter Tax Planning Topics for Advisors
To keep you organized and on top of your clients’ tax needs, we’ve divided the winter tax planning topics into three separate categories: before the new year, planning for the new year, and after the new year.
- Before the New Year:
- Gain/loss harvesting
- Complete all Required Minimum Distributions (RMDs)
- Monitor mutual fund distributions
- Complete charitable gifts/end of year giving
- Last-minute max out to workplace retirement plans and/or 529 plans
- Roth conversions
- Shift income by delaying or accelerating scheduled distributions
- Remind clients about “use it or lose it” nature of FSAs
- Planning for Next Year:
- Updated contribution limits
- Age-related milestones – Will they qualify next year for:
- Qualified Charitable Distributions
- Social Security claiming
- Catch-up contributions for retirement plans
- Medicare surcharge issues
- After the New Year:
- Identify needed trust distributions
- Follow-ups for gains/losses taken before New Year’s
- Roth conversion for current year, if income is known and expected to be stable
There you have it – with these tax topics for every season, you’re well on your way to a year of successful tax and financial planning. From springtime tax return prep to trust distributions in the new year, this comprehensive list gives you the framework for turning every season into a tax planning triumph.
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