Normally, we CPAs do not make these requests until we are in the throes of tax season. Let’s take a proactive look at steps you can take now.

1. Keep your advisor and CPA updated.

Without a workable and effective financial plan, you and your family can be placed at a higher risk of financial instability and uncertainty. Tax planning is only one component of your overall financial plan — but an essential one. If you have experienced any life changes or decided that your goals have changed, we want to know! Let’s work together to create a new financial plan and tax strategy.

2. Maintain complete philanthropic records.

Are you on track to contribute in a fashion that suits your charitable objectives for 2019? Make sure to maintain a file containing the charitable acknowledgments you receive for your charitable gifts of $250 or more. The IRS can and does disallow charitable contributions of $250 or more that are not substantiated with a written acknowledgment from the recipient charity. Gifts of less than $250 must be substantiated with bank records or a receipt or letter from the charity. Other rules apply to noncash gifts.

3. Enact and adhere to timely reminders.

Manage the timing of state and local tax payments, considering the $10,000 limitation on deducting state and local taxes for U.S. income taxes. Ask your advisor to arrange for a tax plan to give you an idea of the adequacy of your income tax withholding or estimated tax payments made or that you plan to make before year-end. A tax projection in the closing months of the calendar year can be a great springboard for other discussions with your financial advisor.

4. Start your spring cleaning now!

The IRS and state tax authorities and taxpayers are limited to years “open” under the statute of limitations for purposes of audits and assessing additional tax or amending for refunds. The statute of limitations is three years in most cases but can be five, seven or even 10 in some limited situations. We recommend clients keep tax returns indefinitely and the documentation to substantiate the income and expenses claimed on returns for seven years post-filing date.

Larry Harris, CPA, CFP®, PFS
Director of Tax Services