Building a solid financial future involves more than managing your investments; it also requires a strong partnership with a certified public accountant (CPA). Your CPA can be a valuable advisor, offering insights and guidance on tax matters essential to your financial well-being.
Open communication is key to making the most of this relationship. Whether you're exploring tax strategies, understanding the tax implications of investment opportunities, planning for retirement, or making business decisions, your CPA can work closely with your financial advisor to help you make well-informed financial choices.
Here are some important questions to consider discussing with your CPA before the end of the year.
1. What Tax Deductions or Credits Might I Qualify For?
Tax laws are always changing, so the deductions and credits you may be eligible for can change from year to year. You’re busy with your own career and life, and staying on top of tax laws is a full-time job, which is why your CPA is an invaluable resource. Seeking their guidance ensures you don’t miss out on tax-saving opportunities relevant to your financial situation.
A CPA will evaluate various factors, such as income sources, investments, and life events, to identify applicable deductions or credits. This comprehensive assessment can lead to significant tax savings. For example, homeownership, childcare expenses, education costs, or self-employment may qualify you for specific tax benefits you hadn’t considered.
2. What Are the Best Ways to Maximize My Retirement Account Contributions?
Asking a CPA about maximizing contributions to retirement accounts before year-end can allow you to tap into tax-advantaged opportunities. Depending on the account type, retirement contributions offer valuable tax benefits, such as tax-deferred growth or tax deductions. Your CPA can guide you on how to fully leverage these benefits within legal limits.
Your CPA can assist with navigating complex rules, including contribution limits for different account types (e.g., IRA, 401(k)), and catch-up contributions if you’re nearing retirement age. They can also provide advice on the most favorable contribution strategies based on your financial goals and current tax situation.
3. Do Changes in Tax Laws or My Financial Situation Warrant Updating My Estate Plan?
Keeping your CPA informed about your estate plan allows them to assess it in light of any updates to tax laws. Asking about potential updates ensures your estate plan remains tax-efficient and accurately reflects your current circumstances and wishes.
Estate planning is closely tied to your financial circumstances at any given time. Changes in income, assets, or liabilities, as well as life events such as marriage, divorce, the birth of children, or changes in business ownership, should be factored into any necessary adjustments.
Tax laws governing estate planning can change significantly, so consulting your CPA helps you stay informed about these updates. They can explain how these changes may impact your estate plan and provide strategies to minimize tax liabilities and maximize wealth transfer to your beneficiaries.
With their guidance, your estate plan can stay relevant, compliant, and aligned with your evolving financial goals and objectives.
4. What Are the Best Tax-Advantaged Savings Options for Education Expenses?
Your CPA can help you explore various education savings options, such as 529 plans and Education Savings Accounts (ESAs). Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. Based on your financial situation and your family’s educational goals, they can break down the benefits and limitations of each.
ESAs provide tax-deferred growth and tax-free withdrawals for qualified elementary, secondary, or higher education expenses, giving you flexibility in planning for your child’s education. Similarly, 529 plans offer tax-free growth and withdrawals for qualified education expenses, making them a popular choice for saving for college.
Your CPA can guide you through contribution limits, eligible expenses, investment options, and potential tax implications for these savings plans. With their help, you can choose the best option to support your family’s education funding goals.
5. Are There Any Changes to Health Insurance Premiums or Deductions That Could Affect My Tax Situation?
Keeping up with changes to health insurance premiums and deductions can be challenging, especially considering their impact on your tax liabilities and financial planning. Your CPA stays informed on healthcare laws and regulations, including how they relate to changes to premiums and deductions, so they can help you understand any potential tax implications.
Being aware of changes to healthcare policies helps you plan effectively. For instance, updates in healthcare laws or changes in your coverage status can influence the deductibility of your health insurance premiums. Your CPA can provide guidance on eligible deductions based on your circumstances, such as employment status, types of coverage, and medical expenses.
Additionally, they can recommend strategies to optimize your deductions, such as using Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs), to ensure you make the most of available tax benefits.
6. How Can I Maximize Tax Deductions for My Business or Self-Employment Income?
Maximizing deductions and optimizing your self-employment income for tax benefits can be complex, but your CPA has the expertise in tax laws and regulations specific to businesses to help you identify deductible expenses you might overlook and advise on effective strategies.
Understanding the nuances of deductible expenses, depreciation, and business credits can significantly impact your tax liability. Your CPA can guide you on structuring transactions and managing finances to maximize tax deductions effectively. They can also assist with navigating complex areas like home office deductions, retirement contributions, and health insurance premiums.
Effective financial management and compliance with tax laws are crucial for your business’s success and sustainability. Building a strong relationship with your CPA ensures you have a trusted advisor to turn to with questions, helping you make informed decisions and optimize your financial strategy.
Partnering with Your CPA
Engaging with your CPA and staying informed about key financial questions is essential for sound financial planning.
At Voice Wealth Management, we value the expertise that CPAs bring to the financial planning process. We encourage you to have regular conversations with your CPA, ask informed questions, and understand the tax implications of your financial decisions. Collaboration between your CPA and our team can ensure that we're taking the best course of action for your financial well-being.
Russell D. Rivera, CFA, CFP® is the Founder and President of Voice Wealth Management (Voice) in New York, NY. He also likes to think of himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.