Use Your 1040 to Identify Planning Opportunities

Thought you were done with your CPA after 4/15? Bad move. Now is when the good stuff can be done. Call your CPA, and book an appointment to review your recently filed 1040. Instead of focusing on getting a return done, pick your CPA’s brain about what he or she can see in your return, and back up data that can help you plan better. CPAs have a lot more talent than just plugging numbers into tax return input sheets. More importantly, they have a perspective and independence that can help identify things that you are just going to miss simply because it is your stuff, and you are too involved. Few clients take advantage of this type of follow up. Their loss. The following are just a smattering of the myriad of ideas. Find out upfront whether your CPA is being objective or selling a product. It might affect the advice.

• Business Entities. Do you have a home business or rental property on Schedule C or E that should be restructured as an LLC?
• Residency. Did you report state income tax as a resident of the correct state? Are there any planning opportunities? Can you take steps to bolster your position as to the state in which you reside for income tax purposes? If you allocate earnings between states, have you maintained a calendar?
• Documentation. Are you keeping adequate documentation for your deductions? Are there some things you can do better? Are you noting business details on the back of business credit card receipts?
• Computerization. Are you still using a manual checkbook? Have your CPA get you into the electronic age. It will make it easy to back up and secure your data, simplify record keeping and more.
• Deductions. Can you plan to bunch itemized deductions to exceed the thresholds for deductibility better in the future?
• IRA. Have you funded an IRA? Can you convert to a Roth? Are your beneficiary designations current?
• Insurance overview. Do you have enough life and disability insurance based on your assets and earnings? Your 1040 and the work sheets supporting it can give your accountant insight as to the appropriate levels of coverage. Are all your properties and assets covered adequately for liability and risk?
• Asset allocation. Are your investments generally reasonable in light of your risk tolerance and needs?
• Investment clutter. Do you have too many accounts in too many places?
• LLC for Schedule C business.
• LLC for Schedule E real estate.
• No medical deductions might mean that you should get a lower deductible plan.
• Property tax on a vacation home may trigger ancillary probate.