Bing, Bing, Bing! April 18th marked the official end (for most of you) of the 2017 tax season. As we catch up on sleep and reintroduce ourselves to our families, it’s also time to reflect on what has probably been the busiest tax season ever for Bach, James, Mansour & Company. Thank you!
A stressful tax season for both clients and CPAs
I remember when tax season used to run mid-January through April 15 – three luxurious months for clients to collect and report information, and BJM to prepare tax returns. This year, with K-1’s showing up at the end of March, tax season was condensed to about 25 days. That put more pressure on you to complete your organizers, and more pressure on us to quickly turn around tax returns. We finished a lot, but unfortunately had to file more extensions than in previous years.
2017 tips and trends
BJM prepared thousands of tax forms for hundreds of clients, which gives us a great deal of insight into the financial health of those clients. Here are five recommendations for maintaining your financial health, as well as that of your parents and children:
Understand your investment strategy and fees. I wrote a recent article on this topic, but we saw a number of investment statements from senior clients that were focused on growth instead of income. During retirement, investment strategy is normally shifted to minimize risk and maximize income. The cost of the wrong strategy can be unnecessary risk and high transaction/maintenance fees. Make sure your financial advisors are acting in your best interests.
Double check your required minimum distributions (RMDs). When you reach 70 1/2 years old, you typically have to start withdrawing money from your retirement accounts. Uncle Sam wants your tax dollars, and charges a 50% penalty on any money that you should have withdrawn, but didn’t. This year, we saw instances where auto-pay options didn’t work or paid the wrong amount, meaning that our clients would have paid massive penalties if we hadn’t caught the errors. Please check your accounts and payments. Ultimately it is the taxpayer’s responsibility to ensure payments are accurate. Kids, please confirm that your parents are receiving the correct RMDs.
Update your beneficiaries. If something should happen to you, will your money go to the right people? If you’re on your second marriage, is your first spouse still your primary beneficiary? Time to check and change. You should have some beneficiary listed, or you could cause problems for family later on. For example, an IRA without a beneficiary goes to the estate – with RMDs factored to the departed person’s life expectancy. A shorter life expectancy means higher taxes. Make sure wills are also up-to-date.
Talk to your kids. BJM has been supporting clients for over 50 years, so we have the pleasure of working with the children and even grandchildren of our clients. In some situations, we’re the only ones who know about the financial health of the parents. Please review your finances with your children and beneficiaries. They may need to plan now for what is inevitable later.
Drop the tax software. Thanks to new levels of complexity in the tax code, we welcomed a few tax software defectors as new BJM clients. One client received a tuition credit that did not show up in the software, and another was able to take advantage of refundable credits due to a job interruption. Yes, I’m biased, but is it worth the risk to save a few dollars?
Please call us. We’re here to help
It’s fair to say that this was the most complex year ever. Maybe I’m still recovering, but I really can’t remember reviewing a straightforward tax return. Financial institution reporting delays (and errors), new checklists, new reporting requirements, healthcare confirmations, 529 withdrawals, debt forgiveness, real estate sales, and business terminations kept us on our toes all season. If you have any questions about the items listed in this article or your general financial health, please contact us and we will be happy to review your specific situation.
Knock on wood, but we have yet to see any identity theft issues, thanks to new safeguards and PINs. The e-File process has also worked pretty well. We still have more work to do this year, then we’ll get ready for 2018!
Neal Bach, CPA.