When it comes to filing an annual tax return, even an intellectual heavyweight like Albert Einstein admitted to being flummoxed. The theoretical physicist once quipped: “This is too difficult for a mathematician. It takes a philosopher.”

I would suggest that rather than a philosopher, taking the stress out of tax season requires a dedicated team comprising your financial advisor and your Certified Public Accountant (CPA), who have the requisite skills and network to create an effective tax strategy for women business owners, professionals, lawyers and technology executives.

It’s one thing knowing the rules and regulations you need to adhere to when filling out your tax return, but for a busy professional it is almost impossible to keep track of tax law changes, as well as the specific implications these might have for your tax situation.

Seeking Expert Guidance

At WealthChoice we are fully versed in the most recent tax law changes and will ensure you are taking advantage of all options to lower taxes. Since our approach is personal and hands-on, we touch base regularly with our clients throughout the year, asking pertinent questions such as:

• Have your stock awards vested?
• Have you paid the estimated taxes on your business?
• Is your withholding on track?

A case in point is the recent passing of the Secure Act 2.0 by Congress. The Secure Act 2.0 is an important piece of legislation that has real implications for retirement and wealth planning.

While the legislation makes provision for accessing retirement funds during tough times, some of the key points which are particularly pertinent to our clients, and which may impact tax filing in the coming years, include:

• The increase in the age for Required Minimum Distributions (RMDs) to 73, rising to 75 in 2033.
• An increase of the annual catch-up contribution limit for individuals aged 60 to 64 to $10,000 starting in 2024 – notably this will be indexed for inflation in the coming years.
• For those 60-63, 401(k) catch up rises by 150 per cent of the normal catch up. For 2023 the catch up is $7,500.
• From 2024, individuals earning more than $145,000 and contributing to a 401(k) can only make catch-up contributions into a Roth account. This will affect taxable income, since Roth contributions are post-fax.

Bearing these changes in mind, it has never been more important to have a team of experts on hand who can offer a holistic approach to wealth management.

To help our clients navigate the complexity of tax season, WealthChoice works with CPAs who prepare and file tax returns on behalf of our clients – this close collaboration with your CPA helps us to avoid any ugly surprises from the previous year, allowing us to take appropriate steps before it’s too late to correct issues with your prior tax year.

This is a tight-knit relationship which yields discernable positives for our clients; specifically lowering the amount of taxes you pay so you get to keep and enjoy more of what you make. It means continuity of strategy and oversight. And it means that your financial advisor can include tax implications and opportunities in their helicopter view of your financial goals and aspirations.

Your Tax Filing Agenda

Having experts in your corner does not, of course, mean that you should abdicate all responsibility. It’s always advisable to stay informed about tax developments, if only to ensure that you are always asking the right questions and setting the agenda for your own tax strategy.

When I sit down with clients, we run through the issues outlined below. Then we work with your CPA to create an effective action plan that covers all the bases.

• Run through any changes and laws that might impact your tax return.
• Discuss ways in which to minimize your tax bill by making the most of tax deductions and tax credits.
• Talk about tax-advantaged (ether tax-deferred or tax-exempt) investments options and how to get the most out of them; from 401(k) plans to traditional IRAs, Roth IRAs and Roth 401(k)s, Health Saving Accounts and even Municipal Bonds.
• Discuss any life changes that may have taken place over the year, and what the implications are for your tax situation.
• Take the time to refine and refresh your existing tax strategy for optimal effectiveness.
• Discuss some of the new digital technologies available to help automate data entry and document collection.

Another important point to interrogate is your tax status. I stressed this fact in Corner Office Choices: The Executive Woman’s Guide to Financial Freedom, and it remains a critical point to cover during such discussions – particularly for women.

While your filing status will invariably change as your life circumstances change, there are very real impacts for women who, for instance, outlive their spouse and change their tax status to ‘single’. Utilizing the best personal tax filing status is a critically important consideration for reducing tax liabilities; so, I urge you to put it on the agenda this tax year.

The Ins and Outs of the 2023 Tax Season

Before delving into some practical tips for planning a stress-free tax season, let’s just recap the new deduction and credit amounts, and the primary deadlines, that you need to make note of:

• In 2023, tax filing deadline for federal tax returns and payments is April 18.
• If you apply for an extension, your extended filing deadline is October 16.
• The standard deduction for 2023 was increased to $13,850 from $12,950 in 2022 for single filers and married individuals filing separately.
• For married couples filing jointly, the standard deduction rose to $27,700 from $25,900 previously.
• The deadline to fund an IRA is your tax filing deadline (April or October).
• The deadline to make an employer contribution to your Solo 401k is your filing date.
• The deadline to have contributed to your 401(k) as an employee was December 31 of the previous year, but you can still take the other steps above to lower taxable income at this point.

Of course, in many cases it makes more sense to itemize deductions rather than taking the standard deduction. This approach allows you to lower your tax burden by deducting items like charitable donations, medical and dental expenses above 7.5% of adjusted gross income, state and local income or sales tax up to $10,000, and mortgage interest on loans up to $750,000 for married couples, or $375,000 for singles. You can also add investment interest and gambling losses to your itemized deductions.

However, as I explain in Corner Office Choices, it is extremely important to discuss with your CPA whether itemized deductions will make a material impact to your tax filing. This approach takes more effort and planning, but for individuals and couples whose expenses exceed the standard deduction, it does have advantages.

Stress-Busting Tax Planning Tips and Dates to Diarize

Planning, keeping abreast of paperwork, and remembering key days in the tax filing process will go a long way to ensuring that you have a relatively stress-free experience in the lead up to tax filing time.

Ideally, tax should be approached as an ongoing and month-to-month area of focus. Over the course of the year, be sure to keep a note in your tax folder of major life events that could have an impact on your tax situation, this might include getting married or divorced, or the death of a parent, a big promotion at work, buying a house (or even a holiday home or a yacht), and even suffering losses as a result of a flood or fire at your home.

It also takes into account business expenses, a liquidity event (such as your company going public), vesting stock awards or receiving a big bonus. It is important to pass this information onto your financial advisor and your tax specialist.

January is usually a big month for annual tax preparations, so I would suggest starting the new year by collecting all necessary documents, receipts and information – this might include proof of charitable donations, your employer’s W-2 withholding form and your W-4 withholding certificate.

If you’ve had stock awards vest, look out for 1099 forms from your brokerage accounts. For independent contractors or freelancers, a 1099 or W-9 form would be required, this is also often the case for female lawyers, many of whom practice as solo 1099 lawyers or in small firms of less than 10 attorneys. Law firm partners will require a K-1.

Most CPAs will want to receive your tax documents some time in February, if your goal is to file in April.

An Expert Helping Hand

I typically check in with clients in June to go through withholding, in order to make sure they are on track given their income year to date.

For clients with vesting stock awards, I encourage them to contact me throughout the year – each time they vest – so we can ensure enough tax is withheld in a savings account dedicated to taxes. We do this because, for those in the higher tax bracket, typically only 22% is withheld.

If the mere thought of working through this tax ‘to-do’ list has your blood pressure racing, then I invite you to get in touch and make a time to join me for a coffee or a glass of wine so, together, we can put a strategy in place to streamline your tax filing experience.