When you think about taxes, you might first think about your accountant. However, a financial advisor can also help you with your taxes. In 2017, Americans paid a whopping $1.66 trillion in taxes to the federal government. If you feel like you paid more than your fair share of that $1.66 trillion, you might want to consult a financial advisor before going back to your CPA.
Here are the main ways financial advisors can make your taxes more efficient long after April 15th has passed.
Save Taxes on Your Investments
The main purpose of having investments is to increase your wealth. If you don’t invest correctly, though, you can end up losing a significant portion of your investment profits to taxes. Your financial advisor can help you understand the best ways to deposit and withdraw money from your investments to minimize the amount of taxes you’re paying.
Financial advisors understand nuances of investments. They use strategies such as tax-loss harvesting, offsetting gains with losses, and maximizing retirement funds to help you be more tax-efficient. And the best part? The more you save on taxes, the more money is left in your investment accounts to keep growing. This strategy compounds its own benefits.
Avoid Tax Mistakes
While doing taxes can be a daunting process, April 15th doesn’t have to be a dreaded date. A financial planner can give you peace of mind by helping you avoid tax mistakes. Tax mistakes can be costly. Not only can mistakes wipe out savings and investment returns, they can also take a lot of time to correct. Financial advisors know what to look out for. By keeping track of your capital gains and losses, financial advisors can create a file of your net results. You can give this information directly to your accountant, leaving less room for error. In tandem with your accountant, advisors can make sure your taxes are filed correctly.
Create a Strategy for Long-term Wealth
When it comes to taxes, financial planners have one major advantage over accountants: financial planners have a long-term perspective. Accountants may only be focusing on the current year’s taxes. However, financial planners play the long game by planning for future success.
Financial advisors can help you create a solid tax plan that will save you money all year long—not just when you’re filing your taxes. If you own your own business, it’s especially important to have a financial advisor analyze your cash flow. An advisor can help you identify cash flow strategies to minimize expenses and maximize tax returns that will last for years. Financial planners can help you prepare for future events, such as estate planning, receiving inheritances or trusts, and making major charitable donations—all while keeping taxes in mind.
Because financial advisors have a big-picture view, they are also helpful when planning for retirement. Long-term wealth strategies can save you money on taxes even after you’ve quit your last job. Financial advisors can help you answer retirement tax questions such as:
- How much tax will I have to pay on my 401(k) withdrawals?
- How do I maximize my Social Security benefits?
- What is my tax strategy for taking required minimum distributions from my retirement plans?
- How much money can I take out of my retirement accounts each year without getting penalized?
By working with a financial planner, you can make your money work for you by saving on taxes both now and through your retirement years.
Let Your Financial Advisor Help with Taxes
Your retirement funds, savings accounts, and mortgage have all taken years of consideration. Why hasn’t your tax strategy? If you want to build long-term wealth, talk with a financial planner about tax strategies. Financial planners have the expertise to save you taxes on investments, help you avoid tax mistakes, and plan for long-term tax savings.
Need help making tax and investing decisions? Contact us today to get started towards a smart financial future. We’ll match you with an advisor who understands your unique situation. Together, you can work smarter, not harder, with taxes.