When you handle your clients’ income tax returns, there’s a lot of responsibility on the line—including their livelihood, first and foremost. One small mistake can lead to some pretty big consequences, such as losing out on some sizeable savings or costing them an expensive audit. While it’s not your responsibility to act as their all-encompassing financial advisor, and you shouldn’t suggest which stocks to invest in, or how much to contribute to retirement savings, there’s definitely some proactive tax advice you could—and should—offer as it pertains to 2019 tax ordinances.
The Tax Cuts and Jobs Act (TCJA) of 2017 was introduced in the 2018 fiscal year, but now that December is about to come and go in the blink of an eye, more changes will continue to roll out and affect tax payers. Is this the year they should plan to take action on an energy-efficient deductible remodel? What are the top tax deductions they might be eligible for? How about fine print and interest rates?
Those will be (some) of their questions, and you’ll need to be prepared with all possible answers. Keep these pointers in mind and you’ll be poised to keep not past clients through 2019 and beyond.
Assess interest rates
If your clients are facing tax underpayments, they should know about how fluctuating the IRS interest rates of 2018 could affect them. For example, The Internal Revenue Service announced that interest rates for tax underpayments will remain at 5% for the calendar quarter beginning Oct. 1, 2018 – Dec. 31, 2018 (the rate for non-corporate tax payers is based on the federal short-term rate plus 3 percentage points).
However, these rates are determined by the IRS at a quarterly basis, so there’s no saying how it could change come 2019. While it might go down from 5%, there’s also the risk that it could increase instead—like when it jumped from 6% to 7% back in 2016, for example. The best way to minimize incurring higher interest penalties? Encouraging them to settle their tax underpayment altogether! Plus as their accountant, you should be helping your clients avoid underpayments in the first place.
Double check deductions
If you’re good at your accounting job, it means that you work tirelessly to find the most amount of applicable write-offs and deductions possible in order to help your clients get the more money back on their tax return. However, if you’re well-seasoned in the sea of complex tax code, you’re already aware of how turbulent these tides are. There’s so many details that require fine-tooth combing: what counts, who qualifies, for up to what amount, what proof or paperwork is needed, and more… then you have to go through the hassle of learning these stipulations all over again once the next tax season comes along!
Don’t just auto-input their information from last year without reading up on how the new 2019 tax laws might change things under the TCJA. For example, last year you could deduct the measure of your unreimbursed therapeutic and restorative and dental costs that surpass 7.5% of your client’s Adjusted Gross Income (AGI), meaning those with an AGI of $50,000 could deduct medicinal costs over $3,750. In 2019, this amount increases to 10% of their AGI—so now might be the time to suggest getting that dental work your clients have been putting off for some time.
New year, new taxpayer
Your clients might have been using your accounting services for years, but if they’ve experienced any life changes in income or filing status, it can dramatically affect their tax return. If they’ve recently found a new job with a new income, obviously their tax bracket can go up or down, but if they’re just thinking about making a switch between careers, remind that they can no longer deduct job-hunting expenses such as traveling for interviews after 2018.
If you have clients whose marriage is on the brink, they should also receive a piece of advice: alimony support that was once possibly deductible vanishes for couples who separate after 2019. By no means should you act like their therapist or family counselor, but you should consider letting them know about how divorce can be one of the biggest financial mistakes they can make.
Ask all the right questions, run the right numbers, and thoroughly research the latest TCJA laws so you can offer the best 2019 tax advice and secure your clients for years to come.
I will definitely do this after reading your blog.