Mid-year tax planning your clients can actually use


Summer usually is the time most of us like to put tax season behind us and try to mentally and emotionally recover before diving in again at the end of the year. Mid-year though is a perfect time for your clients to take a look at ways they can plan and potentially save before year-end.

With half a year left, these strategies have time to make a difference to taxpayers. Bonus. They are easy ones to send out in a newsletter and do not necessarily require you to run specific projections for everyone.

1. Review withholdings/estimates

I find in our practice a lot of people tend to over withhold and underpay estimates. Looking at these numbers midyear provides ample time for adjustment. While large refunds seem like a great idea, it is never a fiscally sound decision to be loaning out your money interest-free during the year or using withholdings as forced savings.

Especially with significantly increased living costs right now, many clients could benefit from a boost in their paycheck if their withholdings are too high. On the flip side, if not enough is being withheld or clients have yet to make appropriate estimates, clients have the opportunity now to catch up on those payments spread out over a reasonable period of time.

2. Look at retirement accounts

I find that unfortunately a lot of clients do not recognize that a contribution to a retirement account is also a reduction in taxes and they are stuck in a mindset of not being able to afford to increase contributions.

Demonstrating how they may be able to put more into their 401(k) and/or IRA while simultaneously reducing their withholdings or their estimates is a valuable service to provide. Most self-employed clients also do not know that they have until the extended due date of their tax returns to make SEP contributions, allowing them more time to spread out those payments separately from tax payments.

3. Ask about losses

Harvesting capital losses is not always the best strategy but in some cases, it makes sense to look for this. Especially for clients investing in cryptocurrency who may have gains they were not necessarily anticipating. Clients don’t often consider their investment income when planning ahead or just looking at their W-2 unless there are large gains involved.

That means they can be thrown off by the tax bill if they had an account they forgot about for part of the year. Now is an integral time to look at how investments are performing and take advantage of what is available.

This type of planning can also help you as the preparer make your life easier during tax season. These planning conversations help to bring to light major changes or new accounts that might be part of a return for the first time this year.

Knowing about changes now will cut down on surprises when you’re swamped during busy seasons and make those items less of a headache. That, combined with helping clients to feel more aware of their financial strategy is a win-win.

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