Friday, October 17, 2014

Help Clients Avoid Taxes on Long-Term Capital Gains: Tax Strategy Scan

Ralph Ortega for Bank Investment Consultant writes: Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

Clients can avoid paying taxes on long-term capital gains on an asset by not selling the property, according to Motley Fool. However, they may reduce their tax bill by holding the asset for at least 12 months to trigger long-term capital gains rates and not the short-term capital gains rates, which are higher. Read the article to know how long-term capital gain taxes are calculated on state and federal levels this year. -- Motley Fool

The Internal Revenue Service has decided to revise one of its limited-amnesty programs for taxpayers with undeclared offshore accounts in an effort to streamline the procedure, according to the Wall Street Journal. Taxpayers living in the U.S. face a 5% penalty on the balance of undisclosed accounts, while those living overseas may owe no penalty at all. A penalty of 27.5% will be charged to taxpayers in a different program who claim to have hidden accounts "willfully." -- Wall Street Journal

Clients may have no adequate understanding of the tax involved when they decide to give a considerable financial gift to a loved one, according to Morningstar. Federal law limits the size of a financial gift by an individual to $14,000 and by a couple to $28,000, meaning an excess of the cap will be subject to gift tax. When clients give more than the annual gift tax exclusion amount, they should file IRS Form 709 so the agency can deduct the amount of their lifetime gift tax exemption. Cash gifts directly given to institutions to pay medical and college costs are among the financial gifts not subject to gift tax. -- Morningstar

October marks the start of the fourth quarter: the perfect time to think about year-end planning strategies and tactics that can help save or make a buck or two. Though not an exhaustive list, here’s what experts say you should consider or do now. -- MarketWatch

Even though the deadline to file your 2014 taxes isn’t until April 15, you don’t have to wait until the last minute to get the ball rolling. Most Americans do just that, with 20% to 25% of all taxpayers usually filing during the final two weeks of the tax season, according to the Internal Revenue Service. This kind of procrastination can lead to costly errors and penalties, overlooked deductions and credits, and higher levels of stress. Whether your goal is to owe less money to the IRS in 2014, get a larger tax refund, or catch costly mistakes ahead of time, it’s never too early to start thinking about your taxes. Here are five things to consider doing now. -- Nerdwallet

With tax-exempt income from US municipal bond portfolios still near historic lows, investors spending from their portfolios can no longer get the income they need by simply increasing their allocation to high-quality, intermediate-duration bonds. As a result, many investors today are chasing yield into dangerous territory. -- Seeking Alpha