Financial planners have the opportunity to guide their clients with efficient tax strategies in the final weeks of every year. The following tips from advisors and tax experts provide some of the more sophisticated moves that can help your clients make better choices and meet critical deadlines before 2016 starts.
Read these key insights to beef up your expertise on tax planning that will make the difference for your clients. Click here to see a slideshow version. -- Ralph R. Ortega
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Your client may not need to pay this tax on their business income if they participate in the business enough to not be considered a passive investor, according to accounting firm Grant Thornton. Participation is almost any work performed in a business as an owner, manager or employee as long as it is not an investor activity. Even so, your client must document their activities. The IRS will not let them make ballpark estimates after the fact. Make sure they document the hours they’re spending with calendar and appointment books, emails and narrative summaries.
"The Solo 401(k) is a great way for sole practitioners to save a lot for retirement (up to $53,000 in 2015 plus over age 50 catch up). But unlike IRAs or SEP IRAs, the deadline to open these accounts is Dec. 31st. Your client may make contributions to the plan up to their tax filing date," says Delia Fernandez of Fernandez Financial Advisory.
"You can't carry over unused exclusions from one year to the next. The transfers also may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax," according to Thomson Reuters Checkpoint, a research and technology provider within the tax & accounting business of Thomson Reuters.
"This seems to be one that is over looked by clients because they may not be fully aware of the catch-up rules and miss out on the extra deferral," says advisor Nick Barringer of Alpha Financial Advisors.