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How Your Financial Advisor Can Help You Prepare for Tax Season


While not all financial advisors are CPAs (Certified Public Accountants) and thus may not be responsible for the filing and handling of your taxes, they can help you make strategic financial decisions throughout the year that can result in a reduced tax burden. Just keep in mind that many of the strategies listed below should be set up well before you are sitting down ready to file. The earlier you talk to an advisor about the points below, the more well prepared you will be come tax time. 

Maximize Your Tax Savings

Financial advisors can advise you on ways to help maximize your savings when it comes to tax payments. For instance, they might advise you to contribute the maximum to your company supported 401K. These contributions can be made pre-tax, therefore helping you to put away additional money that can grow for your retirement. Finding accounts that allow you to make tax-deferred investments are a great way to save money on taxes while continuing to grow your wealth for retirement.

Keep Track of Your Capital Gains and Losses

When it comes time to file your tax return, your accountant will need to know how much your investments earned or lost throughout the year. Your financial advisor will be monitoring this and keep a consistent record that they will be able to easily transmit to your accountant, saving you a significant amount of time and legwork. This electronic file can also be imported into tax documents, resulting in less time you will need to pay your CPA for.

Strategize On Gifting Strategies Throughout the Year

You are allowed a specific amount of money throughout your life to be gifted to family members for a number of reasons. Your financial advisor can inform you of these gifting strategies which will let you transfer some of your wealth to another party without tax penalty. They can also advise you of other qualified charitable donations that will allow you to make monetary gifts and help reduce some of your tax burden throughout the year.

Minimizing Your Taxes During the Distribution Phases

At some time during your retirement, the government will require you to take required minimum distributions from your IRA or 401(k) retirement account which you will be required to pay income taxes on. Sometimes these tax liabilities can be significant, and can come as a surprise to some investors. Your financial advisor will be able to implement management strategies that can help minimize the impact of these tax liabilities and help you determine how much can stay invested at the end of the year without incurring penalties.

Help You Determine Tax-Efficient Investment Strategies

Not only will a financial advisor help you with investing, but they can also guide you in choosing investment strategies that will be best for you regarding your tax liability. While an advisor cannot protect you from capital gains tax, they can provide you with strategies that can limit your tax liability such as tax-loss harvesting, offsetting gains with losses, and avoiding tax issues such as "phantom tax" that can occur with certain investments.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.


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