Many taxpayers spent the last few weeks engaging in discussions with their accountants as they prepared their 2023 taxes. However, one of the most valuable players during tax season can often be your financial adviser, who can assist you in various ways, from providing 1099 forms from your custodian to helping you reduce your tax liability through retirement savings. If this past tax deadline ended with a larger-than-expected bill, consider leaning on your financial adviser for help.
Leading up to the annual April 15 deadline, most people expect difficulty getting a tax preparer to answer the phone. Still, financial advisers have their work cut out for them as well. Often, the financial adviser acts as the intermediary between the investor and the custodian. If your adviser has taught you not to dwell on every statement—because frequently watching the market can cause you to lose sight of the long-term picture—chances are, you may have also overlooked that year-end statement containing your 1099s, reporting your retirement account withdrawals, rollovers, dividends, interest, capital gains, and other taxable transactions made within taxable brokerage accounts. Your adviser can also clarify any questions about capital gains and loss carryovers.
After the end of the year, there is little you can do to help your tax situation. However, your financial adviser can assist you in making IRA contributions for the previous year up to the April 15 tax deadline. Taxpayers can generally deduct the entire amount of an IRA contribution if neither spouse is covered by a workplace retirement plan; otherwise, the deductibility of the contribution may be limited based on adjusted gross income. Some couples may benefit from a Spousal IRA contribution for a partner having little or no income.
Some taxpayers may be able to contribute to a Health Savings Account if they participate in a high-deductible health plan, which allows for tax-deductible contributions up to the April 15 filing deadline. Furthermore, these contributions can pay for health care costs with pre-tax dollars throughout the year, or a financial adviser may help you with a strategy for investing the savings for the long term to cover health expenses in retirement. Financial planners may also advise small-business owners and self-employed individuals to consider SEP IRAs, as contributions can be made up to the tax filing deadline, including extensions.
Sometimes, taxpayers will experience a change in their income during the year that could make them ineligible for Roth contributions made earlier in the year. Your financial adviser can help you withdraw the money, recharacterize the excess contribution into a traditional IRA, or apply your excess contribution to the following year’s Roth contribution.
Financial advisers can also help taxpayers plan for required minimum distributions, generally taxed as ordinary income. Depending on your financial plan, your adviser may recommend starting Roth conversions to lower future RMDs. If you’re charitably inclined, your adviser can help coordinate qualified charitable distributions directly from your custodian to a charity organization of your choosing.
Overall, most financial professionals are accustomed to working in tandem with CPAs or tax preparers and can often help you with financial moves that will put you in a better position in future tax years.
If you have questions on how financial planning can work in concert with your tax strategies, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the April 20, 2024 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
