9 Reasons Why Your Financial Advisor Needs Your Tax Return

9 Reasons Why Your Financial Advisor Needs Your Tax Return

With last year’s tax season behind us and your 2016 return on its way to the IRS, now is an ideal time to share a copy of last year’s tax return with your WESCAP Advisor. These are some of the ways in which you benefit:

• Collaboration – Allows for your CPA, lawyers and your WESCAP advisor to work together in your best interest in order to create a comprehensive, tax-efficient financial plan.
• Roth Conversions – In years that you expect low or no income, a Roth IRA conversion strategy allows you to convert Traditional IRA assets to Roth IRA assets by paying taxes when you are in low income tax brackets. The Roth IRA can then grow and be used tax-free in later years.
• Capital Loss Carry Forwards – Allows your advisor to monitor your capital loss carry forwards. You can deduct up to $3,000 in capital losses per year; however, you are allowed to carryover excess losses each year, which net against any future capital gains. This allows your advisor to more effectively manage your portfolio, offsetting capital gains with prior capital losses.
• Marginal Tax Bracket – From determining the rate at which long-term capital gains are taxed, to whether or you are being affected by the 3.8% Medicare surtax, it is extremely beneficial and necessary for your advisor to know your marginal tax bracket. High tax brackets might also favor the use of tax-exempt municipal bonds, preferentially taxed MLPs (Master Limited Partnerships), or preferred stocks in the portfolio (as opposed to high yield bonds).
• Withholding on IRA Distributions – Understanding your tax situation allows your advisor to help you withhold the proper amount instead of guessing.
• Alternative Minimum Tax – Knowing if you are in AMT allows your advisor to suggest and possibly implement ways to maximize the benefit of your itemized deductions.
• Rental Property – Having full awareness of all rental properties allows your advisor to correctly and adequately incorporate such illiquid assets into your overall financial picture.
• Outside Investment Accounts/Income – Familiarizes your advisor with any outside investment accounts you may have. It is crucial for your advisor to understand your entire balance sheet to invest holistically for you and leads to more in-depth conversations regarding your financial situation.
• Prepare for Potential Changes to the Tax Code – Having your tax return information allows your advisor to be better equipped to make investment decisions on your behalf that may be impacted by tax reform.

Contact your WESCAP advisor today to discuss further.