Don't Forget These Last-Minute Tax Tips: Advisors' Advice

Slideshow April 12, 2023 at 11:27 AM Share & Print

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The April 18 tax filing deadline is quickly approaching.

The Internal Revenue Service continues to process 2022 tax returns and deliver refunds, with nine out of 10 refunds issued in less than 21 days, the agency said Tuesday.

As of March 31, the IRS sent out almost 63 million refunds worth over $183 billion. This year’s average refund so far is $2,910.

Advisors, too, are busy helping their clients figure out the last-minute tax moves they should make. Read the gallery to see how advisors are advising their clients.

Related: 22 Top Tax Jokes

Melanie Waddell

@Think_MelanieW

NOT FOR REPRINT

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1. Business owners can open a retirement plan.

We're helping our small business owners set up Solo 401(k) plans to save dough on taxes. In addition, for clients who are seeking to shelter additional funds, we are advising them on opening pension plans. Both options allow our clients to (a) save on their current tax bill and (b) save additional funds for their retirement.

The amount of money deposited into a Solo 401(k) or pension plan reduces the taxable income for that individual by that amount. For example, if someone contributes $50,000 to his or her 401(k) plan, that amount is deducted from his or her income for that particular tax year. If the individual is in the 25% tax bracket, the 401(k) plan will save him or her $12,500 in taxes. For folks who are able to make six figure contributions to their pension plans, the tax savings is even higher.

— Thomas Balcom, 1650 Wealth Management, Lauderdale-by-the-Sea, Florida

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2. Don't forget IRA basis.

If you have high income, access to a workplace retirement plan and contribute to a traditional IRA, it’s possible your contributions were non-deductible. Remember to nudge your accountant to include any prior IRA basis you have for non-deductible IRA contributions. This is one of the most common items I see forgotten in tax returns. This information is captured on form 8606. Without a record of IRA basis, your non-deductible contributions could accidentally be taxed again when you withdraw them later in life!

— Joey Loss, Flow Financial, Jacksonville, Florida

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3. It's not too late to file an extension or fund an IRA.

If you are concerned about not being ready for any reason, file an extension. However, if you owe taxes, they are still due by April 18 even if you file an extension. You can file an extension and pay your taxes online for free.

Have you funded your IRA - Deductible or Roth or backdoor Roth? You may open an IRA and fund it for 2022 prior to April 18, 2023. Do you have a side hustle with profit? You may be able to open and fund a SEP-IRA up until you file, including extensions. Deductible IRA and SEP contributions will lower your tax bill.

— Kevin Dunleavy, CFP, Orlando, Florida

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4. If you live in a disaster area, you have more time.

Most California taxpayers can take advantage of the extended tax filing deadline of May 15. Individuals who live and businesses (including tax-exempt organizations) whose principal place of business is located in a covered disaster area are granted an extension for an extra month. Clients can check the IRS website to see if they qualify.

Recent retirees may receive earned income from their previous employer in the calendar year following their retirement in the form of a prorated bonus or otherwise. This earned income allows the retiree to make an IRA contribution and potentially take the deduction.

— Justin Rucci, Warren Street Wealth Advisors, Irvine, California

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5. Maximize tax-preferred savings.

Review the ability to fund a Roth or Traditional based on their situation and cash flow permitting. Did they max fund their Health Saving Account for 2022, if applicable? Do a SEP and or Solo 401(k) profit-sharing contribution review, if applicable.

— Julie Hall, Vision Capital Partners, Ann Arbor, Michigan

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