3 Ways A Financial Planner Can Help You Prepare For Tax Season

3 Ways A Financial Planner Can Help You Prepare For Tax Season

It’s spring time, and along with the warmer weather comes tax season. More often than not, your fiduciary advisor is not going to prepare your taxes, that what your CPA is for. That doesn’t mean, that they can’t help you get ready to file your taxes. In fact, they should be using your tax return information to help build your investment portfolio and here are 3 ways they can do just that.

Income and Capital Gains Taxes

As a way to better understand your investment needs or goals, your financial advisor can look for  income in your portfolio. That way each and every investment made is done so purposefully and caters to your specific situation. The tax bracket you fall into can dictate how your advisor invests for you; and if you have any carry-forward losses you may be able to rebalance your portfolio all together and avoid paying capital gains taxes. The market is always multifaceted, so by using your tax returns, your advisor has even more information to use on your behalf. More information equates to better decisions and more tailored investments, which means you, the client, ends up being in a better financial situation.

Missed Deductions

Your financial advisor will be able to help you find missed deductions that your accountant might not have been aware of. Often times accountants take the consultative approach and work on tax planning for their clients making sure details are covered and no stone is left unturned. There are others, unfortunately, who work in a much more generic way and aren’t able to find additional deductions you should be taking advantage of – which is where your financial advisor can help. Remember though, your accountant can only deduct things you make them aware of, and your advisor can ensure that you get every deduction you are due.

Maximizing Tax Advantaged Saving Options

If you fall under the income limit, maxing out your IRAs is pretty common advice around this time of year. But even if your income is over the limit,  your goal should still be to maximize the tax-advantaged savings available to you. If you are able to contribute the max amount for your workplace 401(k). If you are self-employed, you may have an option to save up to 25% of your income or $53,000 (whichever ends up being less) in a tax-deferred plan like a SEP IRA or profit sharing plan. And  even if you can’t contribute up to the maximum for your tax-deferred accounts, the goal remains the same, to save as much as you can, keeping in mind that tax-deferred accounts are meant for long-term savings. Consult your financial advisor, and get answers and plan from them, and then your meeting with your accountant will go smoothly and will result in a stronger financial strategy.

A financial advisor does not have to make decisions in your best interest, but a fiduciary advisor does. Make sure the person investing on your behalf has your best interest in mind, and speak with them about your taxes. While they probably won’t be able to prepare them, they will be able to use that information to strengthen your portfolio and your overall financial plan.

Category Finance