Advisors that own tax offices and do tax preparation for clients as well as prospects are now starting to see people and get really busy. It`s a great time to plant “tax planning seeds” that can turn that tax intake into financial planning appointments and opportunities.
There are just a few that can help with the current year`s tax return retroactively. IRA contributions made now for 2015 tax savings or election of section 179 deductions for equipment purchased in 2015 that advances the expense “all in one year” rather than over 5 or 7 years are examples of current year help. Knowing when to recommend what is a skill set and “art” that must be learned by those facing the public.
The larger opportunities come in recommending behavioral changes that will not immediately help your clients but will make even larger tax avoidance impacts in following years. One example of that is this author`s favorite tax deduction and was one of the deductions that until Jan of 2016 had come and gone numerous times starting as one of the president Bush temporary tax cuts that had expired but was often brought back and continued for “one more year” as a last minute extended tax deduction.
Now, it is not just back, it is permanent and a huge opportunity for both the taxpayer and the advisors whom assist them. IRS Sec.408(d)(8) the right for a 70+ year old to transfer up to 100,000 from an IRA directly to a charity and not have that income declared as taxable income on their return while satisfying their RMD requirement!
Think about the many ways a client could benefit and how to quickly check a tax return for just two quick clues that will identify people with the most potential to want to act on the advice. Start with the one item you’ll need to know that’s not on the tax return; the client`s age. If they are under 70 move on to other tax planning items as only 70+ year olds get to enjoy this one.
Next check to see if there is a number in line 15 on the first page of the 1040. The presence of a number means the presences of an IRA (although if they have an IRA but no number in line 15 they might plan to take advantage of waiting until the next calendar year and taking two RMD`s, an option that one time in their life)
Next check line 40 of the second page to see if they elected the standard deduction for Schedule A items or if they claimed more and there is a Schedule A long form to review. If the Schedule A line 16 has a number then they are giving money to a charity already…”winner winner chicken dinner!” If a client in the 15% or 25% tax bracket gives money to charity than they save 15 or 25%. If they instead give the money directly from the IRA to the charity via a direct custodian transfer they save 100% and the state tax to boot!
You benefit hugely! Being the only one of their Team Members that brought this up (their other advisors, cpas etc..) wins you huge caring and credibility points if you are competing for those assets!
To review: If you have a return in your hand look at line 15, if there is a number in that box say how old are you now? If they answer a number over 70, look at line 40 or for the presence of a schedule A long form. Found it..look at line 16, charity. If there is a number in that box..ding ding ding, look up and say”Oh My, We Need to Talk!”
Plant enough of those seeds and you`ll likely open your eyes to not just that but many other opportunities for CRT`s, Nimcruts and all the other fun stuff in that world, but that’s another Blog!
Happy hunting and as always,
You`re Welcome!
The Tax “What -if” Dr;-)