High Asset Tax Return? Consider These Tips

high assetsTax season is underway. Top earners can manage wealth and save money with some strategic planning around taxes.

 

The Internal Revenue Service (IRS) considers those with a total income higher than $200,000 to $250,000 to be high-income earners. Understanding your tax bracket is important in order to take advantage of tax-saving strategies. Research has shown that high-wealth individuals are more likely to evade paying their full tax liability. The difference between a legitimate attempt to save on taxes and tax fraud can sometimes be slim, which makes understanding your own tax practices important before you sign on the bottom line of your return.

 

Consider these tips for tax preparation this year:

  • Review retirement plans to consider whether converting funds from your traditional IRA into a Roth IRA could be helpful. Roth IRAs allow contributions of after-tax dollars with penalty-free distributions after a certain age. Traditional IRAs use pre-tax dollars and distributions are taxed as income during retirement.
  • Reduce taxable income in any year by making maximum contributions to a Health Savings Account (HSA), your Individual Retirement Account (IRA), and any employment plan, most often a 401K.
  • As we have discussed before, you can assist your generational wealth plan by nurturing a college savings 529 account.  Contributing to the plan does not reduce your taxable income. But contributions are considered gift tax exclusions. Money in the account is tax-deferred and no taxes are paid when the money is cashed out for tuition or educational purposes in the future.
  • If you have stock options, manage your own real estate, earn dividends, made a charitable donation, or enjoyed a capital gain, be sure deductions, earnings, and asset sales are carefully and accurately reported. Overstating deductions and understanding income are an easy red flag for an IRS audit.
  • If you have offshore tax accounts, ensure your FBAR is filed timely on the FinCEN website. The deadline is April 15, but you have an automatic extension to October 15 of each year.

 

The good news is that, despite its comments otherwise, the IRS has not been auditing high-wealth earners as assiduously as medium and low-income earners in recent years. High wealth returns are complicated and require business and tax expertise to review or audit. With increased funding, the IRS is likely to employ and train higher-level auditors to address this inequity, which may cause an uptick in audits of the wealthy.

 

One last tip for any taxpayer: If you use a new tax-preparer or tax accountant to prepare your returns, schedules, and filings this season, be sure to check their credentials, and ask for references to ensure your tax documentation is prepared legally and accurately. If you have questions, speak with an experienced tax attorney for guidance. 

 

Questions about tax strategies to nurture wealth and save on taxes? Our legal group can help.

Representing local, national, and international clients from offices in Chicago and Cleveland, the tax attorneys at Robert J. Fedor, Esq., LLC can answer your questions about the IRS and provide strong representation on matters of criminal tax defense, FBAR issues, and other tax controversies. Call 800-579-0997 or contact us today.

 

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