How Should Clients Plan Ahead for Future Tax Years?

In these uncertain times, clients often ask their accounting professional to provide definitive advice on how to plan ahead for 2020 and future years. What's the best way to respond?

Feb 12th 2020
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Tax tidbits
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In twenty previous columns, I discussed my use of “tax tidbits” to enliven conversations when talking taxes with clients or speaking to groups like business owners, retirees, investors and home sellers. The tidbits discuss, among other things, IRS rulings and other announcements, law changes, court decisions and tactics that trim taxes for this year and even future ones.

I‘d like to share more of my favorites with you here.

During President Clinton’s first term, a key element of his legislative efforts was to attack the welfare system and promise to end welfare as we know it. In 1996, Republican candidate and Senate Majority Leader Robert Dole of Kansas invoked the same oratorical flourish when he declared that “I will eliminate the IRS as we know it.”  Mr. Dole attempted to tap into anti-IRS sentiment abroad in the land. Among other things, he promised a simpler system “that will allow Americans to file their tax returns without the help of a lawyer or accountant, or both,” yet another of the countless proposals for simplification that never get anywhere.

Standard deduction amounts for individuals who don’t itemize on Schedule A of Form 1040 for things like contributions and medical expenses. They’re flat amounts based mostly on filing status and age. The IRS adjusts them annually to reflect intervening inflation.

2019’s amounts are: $24,400 for married persons filing jointly and qualifying widows/widowers (surviving spouses who qualify for the same breaks as married couples for two years after a spouse dies); $18,350 for heads of household; and $12,200 for single persons and married persons filing separate returns.

The law authorizes additional amounts for individuals who are older than 65 or legally blind. 2019’s are $1,300 for marrieds filing jointly or separately and surviving spouses and $1,650 for single persons and heads of household.

Men behaving badly. The Tax Court sustained the IRS’s disallowance of a theft-loss deduction for the cost of an adultery cover-up. Richard C.Y. Ing, a married man, wrote off $192,660 that he’d paid a former lover to have an abortion and destroy medical records.

Whereas Richard thought the payment was extortion and allowable as a theft loss, the court disagreed. He failed to show that his former lover had broken any criminal law.

The court came up with a nifty one-liner when it noted, “It is against public policy to have the government pick up the cost of a failed extramarital affair.”

What’s ahead for taxes? In these uncertain times, clients often ask me to provide definitive advice on how to plan ahead for 2020 and future years. My answer is always the same.

As of now, I can’t tell them how to strategize for next year and beyond. Like other advisors, I’m able to do little more than offer educated guesses about trends several years from now.

After all, advisors are obliged to moderate predictions to reflect assumptions about wide-ranging concerns—ballooning budget and trade deficits that weaken the dollar, inflation or deflation, oil prices that increase rapidly and decrease even more quickly, chaotic conditions abroad—particularly in the Middle East and Eastern Eurpope—and the potential for terrorist attacks within the United States, to cite just some of the uncertainties. But clients who stay on top of what’s happening, can at least be assured of keeping themselves up-to-date and making sure they know what to expect from taxes

There’ll be more tidbits in subsequent columns.

Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 300 and counting). 

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By albertwrite
Feb 17th 2020 19:04

Making sure you are not the one who burns the night oil during the tax season, needs proper tax advice and planning. The information shared will definitely help clients plan better. Bikham Finance appreciates the information shared.

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