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Weathering tax season 

Every time the calendar flips to a new year, a new tax season descends upon us. In late 2017, perhaps the biggest overhaul to the Internal Revenue Code in more than 30 years was passed into law and with that comes a lot of questions from advisors and tax preparers, as well as their clients.  

Just like any other tax season, preparation is key; especially this tax season, considering the many changes that took effect under the Tax Cuts and Jobs Act (TCJA). Reactions to taxation and tax-law changes - good, bad or otherwise - are understandable. Taxes and income are deeply personal and have an impact on everyday life. 

While you’re engaging your clients and CPAs over the next several weeks in preparation for the approaching April tax-filing deadline, individuals and families as well as business-owner clients will no doubt have many questions and concerns. Here are three tips to help advisors aid in conversations with their clients: 

1. Ease the burden of tax filing by gathering needed information now

Whether your client prepares his own tax returns or pays a professional, good organization saves time and money. In addition to collecting the common tax documents (e.g., W-2s, 1099s, and mortgage interest statements), clients should gather receipts, evidence of contributions to charities and 529 plans, and basis information on assets sold during 2018. Clients who exclusively use a portion of their homes as an office may deduct the proportional costs (based on square footage) of rent, utilities, insurance, and maintenance if they use the space for administrative and management functions and even if they don’t meet clients there. Finally, clients should consider lifetime events that might impact their taxes such as marriage, divorce, birth of a child, adoption, sale of a home, etc. Gathering and organizing this information is the first step toward reducing the stress of the tax season and ensuring timely filing. 

 2. Be proactive

What actions can you take prior to tax season to lessen its burden? 

It’s not too late to save on 2018 taxes!  If your client qualifies and acts prior to April 15th, he or she may deduct contributions to an IRA up to $5,500 ($6,500 if over 50) on the 2018 income tax return.  Maximum SEP IRA contributions of $55,000 for 2018 can be made any time prior to the tax filing deadline, including extensions.

If your client participates in a high deductible health plan, he or she may be eligible to contribute to a health savings account with pre-tax dollars.  For the 2018 tax year, the contribution limit is $3,450 if single and $6,850 for families, with an additional $1,000 catch-up contribution if 55 or older.  Contributions for 2018 can be made through April 15, 2019.

3. Make efficient use of technology

Advances in technology over the last two decades have reduced the burden of tax preparation and filing. Clients should embrace technology as a means of making the process more efficient. Some quick tips for clients to save time and money:

  • Whether self-preparing or hiring a professional, tax information from documents filed with the IRS (W-2s, 1099s. etc.) can be downloaded directly into tax-prep software so be sure to access electronic versions of these documents.
  • On-line banking makes it easy to manipulate account information and organize data about relevant expenses paid during the year (e.g., estimated tax payments, medical and tuition payments, and business expenses).  
  • The IRS has offered the opportunity for electronic filing of tax returns for several years. Taxpayers who e-file typically receive acknowledgement that their returns have been filed and get their refunds faster than those who paper file.

Remember, tax season provides an opportunity to strengthen relationships with clients and add value during a potentially stressful time. Clients should not be overwhelmed by the significant changes to the tax code and the avalanche of literature those changes have generated. By focusing on the fundamentals of organizing information, taking advantage of tax-saving opportunities, and embracing technology, clients can reduce their tax-related stress. Affirming the role of “trusted advisor” is critical to helping clients weather the tax season storm. 

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Michael N. Corr – Biography

Michael Corr is a member of the National Planning Team for Lincoln Financial Advisors and serves as Chief Estate and Business Planning Strategist. In his role, Michael works with financial advisors to identify and bring to market estate and business planning strategies that help clients toward achieving their financial planning goals. Michael has more than thirty years of experience helping individuals and families toward achieving their financial goals. 

Michael earned a B.B.A. in Accounting from the University of Notre Dame, a J.D. from Widener University School of Law, and an LL.M. in Taxation from Villanova University School of Law. He holds the Series 7, 24, 51, and 63 licenses. Michael and his wife, Amy, live in Royersford, Pennsylvania, with their four children.

Michael Corr is a registered representative of Lincoln Financial Advisors Corp.

Lincoln Financial Network is the marketing name for Lincoln Financial Securities Corporation and Lincoln Financial Advisors Corp., broker/dealer’s (Member's SIPC) and affiliates of Lincoln Financial Group.