Why CPAs Should Consider Financial Planning

 Most affluent Americans (78 percent) say they’re likely to use their tax returns to help their financial planning, according to a recent survey for the American Institute of CPAs (AICPA). Naturally, CPAs are well-positioned to help clients with this.

In fact, survey findings underscore the bridge between taxes and financial planning, according to the AICPA’s statement about the survey. Americans can find details of their cash flows, important investment information, insights into retirement and estate planning, and identify overlooked strategies to help them achieve their financial goals, the AICPA stated.

“In today’s dynamic tax environment, taking some time after tax season to ensure your financial plan is in sync with the current law will allow you to feel more confident you’re on track to meet your financial goals,” said Andrea Millar, CPA/PFS, director of financial planning, Association of International CPAs. The survey revealed that 23 percent of affluent adults were notified by the IRS that they had overpaid taxes in the last decade and were owed a refund; 14 percent underpaid taxes and owed the IRS. While over- or underpaying payroll tax can be a strategic move, a big tax bill or a large refund can also indicate that adjustments are in order, according to the AICPA.

Further, 46 percent of respondents said a major life event – having a child, getting a divorce or buying a house – would prompt them to adjust their financial planning to be more tax efficient. Health issues, retirement, disability, divorce and having children – in that order — were most likely to spur financial planning changes.

The survey identifies affluent Americans as those with either $250,000 in investable assets or more than $200,000 in household income. CPAs can guide clients in these six ways in reconsidering their financial plans:


  1. Make 2018 contributions early. Contributions to IRAs, 529s and 401(k)s done early in the year help compound tax-free account growth. Done early every year, that growth can be substantial over time.
  2. Take advantage of 529 college savings plans. The new 529 provision allows clients to pay $10,000 annually per child from the plan. If clients live in a state that allows a deduction for contributions even without an established 529 plan, “it could make sense to deposit up to that deductible limit in the account first before paying education expenses, which can lower state income taxes,” the AICPA notes.
  3. Sign up for employer 401(k). Clients who skip enrolling in company matching programs miss out in two ways: bolstering their retirement savings and missing a chance to cut taxes. Clients should ensure that they are contributing enough to get the full company match, which basically is free money. For 2018, the contribution limit for employees enrolled in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $18,500.
  4. Review employee benefits. Clients should examine if changes need to be made in benefits during the next open enrollment period. Many companies offer health savings accounts or pre-tax commuter benefits.
  5. Review investments and asset allocations. An annual investment review helps ensure that financial goals and life circumstances haven’t changed. If they have, that can affect clients’ asset allocation.  Clients should review the balance of their investments as it relates to the risk level they want.
  6. Consider bunching medical expenses in 2018. For 2017 and 2018, the threshold for medical deductions is 7.5 percent of income. Beginning in 2019, that rises to 10 percent.

Article credit Accounting web & Auther Terry Sheridan

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