Why Don’t Advisors Look At Your Taxes?!
Please tell me that your Financial Advisor requires you submit tax returns every year.
EVERY recommendation we make is going to have tax consequences in one way or another.
How do they know what to recommend without details of your tax situation?
How do they know they aren’t missing opportunities to save money?
How do they know they are missing mistake another party made somewhere?
At Snowcap Financial, tax returns are required!
Every recommendation that I make as a Financial Planner is going to have tax implications. One way or another, taxes come into play.
Roth vs. Traditional 401k/IRA contributions: major tax implications
Estate Planning, wills, trusts, etc,: major tax implications
Passive Income and managing exepenses from them: major tax implications
Paying for your your kids’ educations: major tax implications
Life and Disability insurance set up: major tax implications
Taking money out in retirement: major tax implications
Rolling money from your 401k to an IRA: major tax implications
Buying a home: major tax implications
Almost any financial decision you make has tax implications. Without the complete picture of your financial lives, how can an Advisor make appropriate recommendations.
This is why we require any client coming on board to give us their tax returns as they onboard, and every year going forward. We are going to review the past year to have a better idea of where we are heading in the next year. Also, we are going to look at the current year return before it is filed to make sure we don’t miss any opportunities to save on taxes or capture tax credits.
When you give your tax documents to a professional to process your return, their job is to process the information in front of them. Not only that, but it is probably one of hundreds in the spring leading up to Tax Day. That is not a slight, at all, that is just the nature of their jobs. There are many great CPAs and EAs that are very strategic thinkers and help clients in a proactive way, but it is tough for the best to do anything but plug in the numbers in the first months of the year.
As a Financial Planner, it is my job to be the strategic thinker when it comes to taxes, and to look forward at the coming year for opportunities to save.
In 2021, with the changes to the Child Tax Credit, we had a few clients that, because of their income, we had constant conversations in the last half of the year monitoring their incomes to ensure that we came in under the line to get the full tax credit. To do so, we played with the levers of 401k contributions, some using Roth and others Traditional. The extra credit made the value of keeping the Adjusted Gross Income a bit lower too great to pass up!
We don’t tip the IRS!
You should pay every cent of tax that you owe the IRS, but we do not want to leave a tip.
In a 1934 ruling Judge Learned Hand gave an opinion that said:
“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes.”
It isn’t your job to pay more money to the IRS. It is your job to pay as little as possible.
If you have rental properties, are you tracking all of your expenses to deduct against your income from them. Same for self-employed individuals?
Are you weighing taxes today versus long term taxes? Sometimes paying a little more now saves a ton later (Roth contributions and conversions)!
We are going to help you strategize ways to save money on taxes. We are looking forward and backwards to do this.
If you have an Advisor, did they ask for your returns? If you are interviewing other Advisors, did they ask for your returns?
If not, you should really assess whether or not they are willing or able to do everything that they can to ensure you are getting the most value for your money, and getting the most out of your money.
Don’t miss opportunities to save on taxes!
The IRS is happy to take more money from you. In fact, you may donate money to the government at any time!
In fact, here is the link to donate money to reduce the US National Debt!
The government is happy to take your tax money, but you should not be happy to give it.
Make sure that you are being strategic in the way that you approach your taxes.
Please make sure you aren’t making a mistake.
Every financial decision you make should be taken with the tax ramifications in mind.
Let’s ensure you’re not tipping the IRS.
All written content on this site is for information purposes only. Opinions expressed herein are solely those of Snowcap Financial, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.
Photo by Nataliya Vaitkevich