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ArticlesBusiness and leadershipHere’s a 15-item checklist of low-hanging tax tips for financial advisors

Here’s a 15-item checklist of low-hanging tax tips for financial advisors

Here’s a 15-item checklist of low-hanging tax tips for financial advisors
It’s tempting to put April 15th behind you, but here’s how you can plan for next year

by Alan L. Olsen, CPA, MBA (tax)
Managing Partner
Greenstein Rogoff Olsen & Co. LLP

With April 15th behind us, many people put tax issues onto the back burner until they’re staring at the next deadline. Alan Olsen, managing partner at Greenstein, Rogoff, Olsen & Co., LLP in Silicon Valley, Calif. recommends that businesses think ahead. He has prepared a list of thoughts an advisor can use for clients as a check-off list during 2010 to minimize tax burdens for April 15th 2011.

You can never go broke taking a profit; however, profit is subject to taxes. Therefore, a great tax plan will preserve your client’s wealth. Tax planning should be a year-round process. Effective tax planning may allow your client’s lifestyle expenses to be above “e” line deductions. As an RIA, being familiar with the new tax laws will add value as you help clients prepare their financial plans.

You also need to understand the right type of investment and the impact a passive type of investment will have on a client’s tax situation.


For example, a client may have one primary home and several other homes. As long as a single home is not lived in more than 14 days, none of the other homes are considered as second homes but rather as investment properties. Expenses incurred throughout the year to travel to and inspect and maintain each property are considered expenses deductible above the line.

1. Consider taking advantage of the Roth IRA conversion in 2010 which allows you to convert your IRA into a Roth IRA. The conversion is included in taxable income which can be paid in two installments (2011 & 2012) and accounts for situations where a taxpayer may be left with a large tax bill from converting if the market falls in value (by placing funds back into your regulation IRA account within a specific timeframe. Check state laws for conformity).

2. Be aware of the impact the new health care legislation is imposing on the Medicare tax on interest, dividends and gain on sale of investments. Beginning in 2013, a 3.8% excise tax will be imposed on this income. Taxpayers with large positions of highly appreciated stock may want to consider liquidating those positions in 2010. Also, in 2010 the tax rate on long term capital gains is 15% and is scheduled to rise to 20% in 2011.

3. Take a second look at a Roth IRA conversion. The new Medicare tax (discussed above) will not apply to distributions from Roth IRA, IRA, 401(k), 403 or 457(b) plans. Any distributions from the Roth IRA held for 5 years and made after 59 1⁄2 is not subject to the income tax or “new” medicare tax.

4. In 2010 consider hiring a person who has been unemployed for at least 2 months. No Federal payroll tax for the employee and employer will be due on salary for the balance of 2010 under the HIRE act. A payroll tax exemption form is filed on the newly released IRS Form W-11.

5. Sell highly appreciated assets to a charitable remainder trust. Taxpayers can defer paying the tax on the sale, receive a charitable contribution donation, and set up a lifetime annuity from the trust. The tax is then paid on the funds distributed from the trust.

6. Sit down with your accountant and review your income, expenses and potential deductions and decide what you can do now to impact the year.

7. Sell loser stocks to offset gains. If you have big capital gains consider selling some of the dogs. You can erase a tax liability on the gain with a corresponding loss.

8. Put the maximum amount in retirement accounts. Amazingly enough payroll deductions can increase your take home pay because they reduce your taxable income.

9. If you pay off your state taxes or property taxes early that accelerates your federal deductions.

10. Think green and take a tax credit. The government is happy to help out those of us who are energy efficient with $500 and up to $3,000 tax credits.

11. Be aware of the Alternative Minimum Tax (AMT). Sometimes accelerating deductions can cost you money if it triggers the AMT.

12. If you expect your income to be lower in 2010 than 2009 make additional state tax payments so you can take the deductions this year.

13. Make charitable contributions. If you have appreciated stock that you’ve had for more than one year you may want to keep the cash in your pocket and donate the stock. You’ll avoid paying the tax on the appreciation but will still be able to deduct the full value of the stock. You win. Your charity wins. The only loser is Uncle Sam.

14. Don’t overlook other tax credits. Tax credits are much more valuable than deductions.

15. Being married helps. Look at your spouse’s income or lack thereof. Many of the calculations the IRS makes is based on the tax payer’s marital status.

The post Here’s a 15-item checklist of low-hanging tax tips for financial advisors first appeared on Advisors to the Ultra-Affluent – Groco.


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