We here at Fragasso Financial Advisors firmly believe in the concept of each client creating their own financial Board of Directors. In most cases this includes a trusted accountant, lawyer, banker, and financial advisor. These relationships are extremely important when progressing through life’s journey and each member of this team should be working as an advocate to assist in advancing toward various financial goals.
With you, the client, acting as Chairperson, this professional network has individual specialties and areas of expertise which you rely on for constant and thorough guidance. However, like all well-functioning boards, there are certain times throughout the course of the year where these advisors must work in close conjunction on your behalf. With the tax deadline fast approaching, it is time for your accountant and financial advisor to have an open line of communication.
When we turn the calendar to a new year, we start counting down the winter days until April 15th. There are steps that both your accountant and advisor should have already completed. These items include an estimation of investment gains (or losses), summarizing account contributions/distributions and reporting various sources of income throughout the year. Armed with this knowledge prior to any firm year-end deadline, you now have the ability to proactively make the most financially beneficial decisions.
For example, let us assume your advisor harvested investment capital losses during a turbulent market time (COVID-19), your accountant now can advise on an acceptable amount of investment gains to realize at perhaps a net neutral tax liability. Or, if you are having an unusual high earned income year along with strong investment gains, your accountant and advisor should be working with you to determine potential tax-deductible retirement contributions, charitable donations, or favorable ways to fund your children’s college education.
The federal and state tax codes are complicated and constantly changing. With a busy personal and professional life, you are not expected to be an expert or to remember every taxable event that happened throughout the past year. A close and productive relationship between your accountant and advisor ensures these details and documentation are properly being shared.
Your advisor should clearly communicate all account changes and updates that have recently occurred. This will help your accountant better understand corresponding tax documents and determine that all related tax information is being filed correctly on your return. Furthermore, if investment related 1099 tax forms or K-1 distributions are delayed in being reported, your accountant has sufficient time to file for a necessary extension.
Your advisor at Fragasso Financial Advisors takes great pride in each of their client relationships. Being a member of your Board of Directors is not a task that we take lightly. Coordinating these key financial items is crucial and something that we will be working hard to accomplish with the approaching tax deadline.