Last-minute tax tips for your clients

• by secure_financial
• Posted on 16 December, 2019

1. Estimate the 2019 tax by adding up the taxable income streams, then subtracting the tax breaks to use. This will help determine whether to take the standard deduction this year or itemize. The standard deduction for 2019 is $12,200 for single taxpayers and $24,400 for those married filing jointly. Each spouse who is 65 or older can add an extra $1,300 to the standard deduction, while singles 65-plus can add $1,650.
2. Have your client check the IRS withholding estimator to see if they are on track to meet one of those safe harbor tests. If they aren’t on track, they still have some time to avoid underpayment penalties and lowering their taxable income will also reduce their taxes owed.
3. If your clients are still working, they can put up to $19,000 in a 401K or other retirement account by the year’s end.  Those clients who are 50 and older are also allowed an extra catch up contribution. That extra $6,000 allows for the client to put away $25,000 for the year which will reduce the adjusted gross income and taxable income.
4. If your clients haven’t done so already, they should withdraw the required minimum distributions from their retirement accounts.  If your clients are at risk of getting hit with an underpayment penalty, they can increase the withholding on the distribution which could cover the tax bill on any taxable income sources. Note they can also adjust withholding on Social Security benefits, pensions or annuities.
5. Also note, that unreimbursed medical expenses that exceed 10% of adjusted gross income (AGI) are deductible in 2019. Consult IRS Publication 502 for a list of qualifying expenses, which include a portion of long-term-care insurance premiums and certain home improvements made to accommodate a medical condition or disability.