More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Annuities: Estate Tax The value of certain types of annuities may be included in an estate’s value. Understanding the intricacies of these inclusions is a critically important aspect of estate planning.
This is the second in a series of 23 tax tips that AdvisorOne will publish on each business day in March as part of our Tax Planning Special Report (see our Special Report calendar for a more complete list of topics to be covered and experts who will deliver their insights).
When it comes to tax planning, we asked the experts to recommend strategies that many advisors commonly miss and ones that you may just need to be reminded of.
Today’s tip comes from Bernard Kiely of Kiely Capital Management in Morristown, N.J., Kiely (left) is a CFP and CPA and has been a fee-only financial planner and provider of income tax services for individuals for more than 25 years. He has been named a “Best Financial Advisor” by Worth magazine multiple times, regularly serves as a source for AdvisorOne reports, like in this article on the implications of healthcare reform last year (and profiled in Investment Advisor) and has twice been named by Accounting Today magazine as one of the CPAs to know in financial planning.
He is also a long-time member of NAPFA, where he serves as the dean of NAPFA University’s School of Taxation, and holds a BA in Accounting from Upsala College and an MBA from Rutgers University.
The Tip: Accelerate Expenses for Self-Employed Clients (and Yourself).
One tax planning strategy that Kiely says can work for advisors as well as self-employed clients is to purchase necessary supplies for the new tax year in the year just ending. “What I do,” he says, “is buy all the supplies for tax season—extra cases of paper, printer supplies, refilling the postage meter—I tend to do that every year.”
This strategy, like much tax planning advice, comes with a caveat: Kiely warns that not accelerating expenses in the following year means you have only eleven instead of twelve months’ worth of expenses, which can cause a problem.
As a corollary to this tactic, Kiely also points out that advisors in particular might want to consider using credit cards for such purchases, since he says, “If you’re an advisor, client fees come out in January, so by December I am broke; I buy what I need and put it on a credit card. When you use a credit card, it’s like going to the bank and borrowing money.” You get credit for the purchase in the year it’s made, but don’t have to pay for it till the following year.
See our Tax Planning Special Report calendar for a list of future topics to be covered.