With the new year past and tax season being extended, it provides an opportunity to take a look at some tax activities that are typically ignored throughout the year. Keeping up on these will safely prepare you for any other changes coming up.
- Tax withholding check-ins: A quick check-in on tax withholdings early in the year can be beneficial. If a significant life event has occurred, then it is always a good idea to check current withholding information to ensure withholdings are still accurate.
- Beneficiary designations: Coupled with tax withholdings, do not forget about beneficiary designations. These are tremendously important when starting a new job or working on wealth planning. Knowing how the law works and who your appointed beneficiaries are could play a role in contributions and benefits received from retirement plans.
- Estate Planning review: Well-designed estate planning should be considered in conjunction with beneficiary designation reviews. Even if one was not affected by the Tax Cuts and Jobs Act, it is still beneficial to review to ensure marital and family trusts are still applicable. Additionally, those who made modifications during the year, especially those as a result of income tax planning, should consider if their existing estate plan is still in line with their overall estate and tax planning goals.
- Security habits: Building better security habits is pivotal for successfully keeping private information private. This should not be limited to once a year, but security should be checked regularly. Along with building your own security habits, client data protection is important and should be combined with protecting your own data. Federal law requires tax professionals to create and follow a written information security plan to protect client data. Some recommendations are strong passwords or passphrases, using secure internet connections, and be mindful about personal and client information.
- Cryptocurrency: Much like foreign accounts, the IRS has focused their interests on virtual currency reporting. As a result, a new checkbox on schedule 1 of Form 1040 has been added for virtual currency. Just because it is intangible does not mean it should be forgotten about, remember to check in if you own any virtual currencies and report them. Answering honestly can help save you time and money by avoiding civil and criminal penalties.
Even though tax filing only happens once a year, tax planning and compliance should be a year-round objective. Tackling these items early in the year and throughout could help prevent surprises down the road. Reach out and check in with your trusted tax advisor and look to do a mid-year review of your business and tax planning.