With tax bills among clients’ top concerns, year-end planning offers an opportune time to take advantage of tax-smart strategies and meet 2014 deadlines.

Here are five year-end planning ideas that require action by December 31, 2014, that could help you identify ways to build your business.

1. Review required minimum distributions (RMDs). Many investors take annual RMDs from individual retirement accounts or 401(k)s in December. Contact clients now to ensure they are on track. The Internal Revenue Service has rules for taking RMDs, including penalties for not taking them or for miscalculating the amount. Having a conversation about RMDs may also lead to identifying other retirement accounts that could be consolidated.

2. Discuss the benefits of a Roth IRA conversion. While income taxes did increase for some individuals in 2014, a Roth IRA conversion may still make sense. The Roth IRA offers tax-free withdrawals in retirement, no RMDs, and the option to leave an income-tax-free legacy to the next generation. Some individuals may experience regular increases in income. Completing a Roth Ira conversion when income is lower may help clients better manage their tax bill in retirement. Also, with increasing federal budget pressure and concerns about the future viability of Social Security, tax rates may head higher in the future. While the deadline to convert is December 31, 2014, it’s important to note that a conversion can be reversed by October 15, 2015.

3. Identify opportunities to harvest losses. Tax-rate increases combined with new health-care-related taxes make tax-smart planning more critical than ever. When reviewing portfolios, explore opportunities to harvest or realize investment losses to offset other gains.

4. Conduct annual beneficiary reviews. It’s important to update beneficiary designations. This discussion could also uncover other accounts that may be consolidated. Clients who own IRAs that will not be used for retirement income may want to consider a “Stretch IRA” strategy to ensure that the tax-deferred income benefits extend to future generations.

5. Talk to small-business owners about how to benefit from a net operating loss (NOL). Some small business-owners who will record a net operating loss this year may not know they can turn this loss into a tax advantage. NOLs may be carried forward to offset ordinary income on future tax returns. And there is no limit to how much of the loss can be used. Clients planning to carry forward large losses can use those losses to offset the additional income from a Roth IRA conversion and avoid a tax liability.

The rules for calculating NOLs are complicated, therefore it is critical for clients to consult with a qualified tax professional. Advisors may want to form strategic relationships with certified public accounts to assist their clients. This planning effort is a value-add for clients and has the potential to lead to referrals for retirement and other business-building opportunities.


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