Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Receiving a big refund means that taxpayers are giving the government an interest-free loan that they could grow if they used the money in retirement saving or investment, according to Time Money. While having a tax refund is a preference, taxpayers may consider adjusting the amount withheld from their paycheck after facing marriage, divorce or any other life-changing event. They may look into their tax-filing history or their saving and spending habits when they opt to make an adjustment to their withholding. -- Time Money
Taxpayers are advised to spend their tax refund wisely by investing the money, saving it in a 529 plan or using it to fix or renovate their homes, according to the Motley Fool. They may also add the money to their emergency fund or retirement savings and use it to pay down their debt. Donating the refund to charity is a good move as it will mean a tax deduction, while using it for shopping or getting a new car is possible provided they are saving enough for retirement and have no outstanding loans. -- Motley Fool
An investor revamped her investment portfolio upon the recommendation of a financial advisor so she could save on management fees and taxes, according the Wall Street Journal. She transferred more than half of her assets to a portfolio consisting mostly of tax-managed exchange-traded funds and used the remainder of her money to a deferred annuity. "Some advisers don't have a choice about what they charge, but they can make a difference when they understand the effect of things such as the 3.8% surtax and what that means to their clients," the financial advisor says. -- Wall Street Journal
A client may actually be apt for a tax refund if he receives an automated letter from the Internal Revenue Service stating he owed money, according to DailyFinance. This is usually the case if the client forgets to declare on his tax return the sale of a mutual fund or stock. For mutual funds acquired after Jan. 1, 2012, and stocks purchased after Jan. 1, 2011, IRS does not know the cost paid for such investments and the agency may overstate the tax owed. It is best to state the cost basis information on future tax returns to avoid these notices. -- DailyFinance
- Taxable-Bond Investor Checklist: Tax Strategies Scan
- Weigh All Options Before Tax-Loss Harvesting: Tax Strategies Scan
- Besting the Index Fund: Tax Strategies Scan