December’s here, but you can still encourage your clients to act strategically about their tax planning. The key, of course, is to get them to make moves that help minimize their liability.
Although the advantages of the new tax laws come with some complexity, your clients can reap lots of opportunities without getting bogged down in the details.
Here are 10 tips that can help save them money:
1. Maximize employee compensation and benefits.
If your client offers retirement plans or HSA or FSA accounts to their employees, have them review their contributions, and maximize them if possible.
If your client doesn’t have plans, it may not be too late to get them established. Paying out bonuses and commissions or making needed adjustments to their withholdings may also be advisable.
2. Optimize gains & losses.
If your client has yet to start harvesting their capital gains or losses now, encourage them to do so.
Get them to use methods like installment sales or like-kind-exchanges when disposing of their assets and show them how they can manage the impact of the Net Investment Tax, or the 14-day rental limit on their vacation home.
3. Preserve the deductibility of charitable contributions while using the standard deduction.
Clients over 70½ with an IRA who claim the standard deduction can still give to charity and receive a benefit.
Through the Qualified Charitable Contribution, a client who gifts a Required Minimum Distribution (RMD) directly to charity doesn’t need to report it as income. Although they don’t get a charitable deduction, they are able to reduce their taxable income.
4. Defer business income in advantageous ways.
On the accrual side, make sure your client has updated their accounts receivables and customer deposits. On a cash basis, you might suggest that they defer some invoicing or customer payment requests until after the end of the year.
Besides reporting losses, your client should also use any credit-carryovers that are set to expire by December 31st. Finally, have them consider treating any business ventures that they run with their spouse as disregarded entities.
5. Accelerate business expenses towards tax-time advantage.