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Should clients take their RMDs now? Tax Strategy Scan

Muni bonds are a good alternative to annuities and other fixed-income vehicles for generating tax-free income, an expert says.
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Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

Should clients take your RMDs now?
Retirees who intend to invest the RMD from their retirement accounts will be better off taking the mandatory withdrawals as soon as possible, rather than waiting until the year's end, writes a Forbes contributor. If your client is using the RMD for current spending, then the distribution becomes a moot point. "If you sell volatile assets such as stock inside your IRA and use the distributed cash to buy back these assets, you will more likely have a better tax result than if you wait until year end to take your RMD," the expert writes. "One of two things will likely happen between now and year end: the equities will go up or they will go down."

Coronavirus and taxes: Here's what to know about deadlines, refunds and filing online
Although the federal government has moved the tax filing and payment deadlines to July 15 from April 15, clients should file their returns as early as they can, especially if they are expecting a tax refund, according to this article in Money. Experts are urging states to push back their own filing deadlines. “States which do not extend their own filing deadlines to July 15 will negate much of the benefit of the federal extension, because taxpayers would still have to prepare much of the relevant tax information — a great deal of it drawn from their federal 1040s — by the earlier date,” an expert at the Tax Foundation says.

When clients need to pay taxes on Social Security
Retirees may owe income taxes on up to 85% of their Social Security benefits if their combined income — adjusted gross income, nontaxable interest and 50% of retirement benefit — exceeds a certain threshold, according to this article in Yahoo Finance. To minimize the tax bite on retirement benefits, seniors are advised to take hefty IRA distributions before filing for Social Security, donate their RMDs from their IRAs directly to a charity and direct some of their savings to a Roth IRA. "When you are trying to make your decisions about when to take Social Security, take tax into account as a factor," according to a CFP.

How to plan for the unique financial challenges women face
Women who want to hurdle their unique financial challenges are advised to set their goals and develop an investment strategy to achieve these goals, according to a CFA in MarketWatch. They are advised to also prepare for unforeseen events by building a cash reserve equivalent to three to six months of living expenses and engaging in estate planning, she writes. "Proper estate planning can help you manage estate taxation, ensure your assets will go to the intended beneficiaries and minimize family turmoil."

First, prove you’re listening; then make sure they know you’re taking action to protect their portfolios.
March 17

You can claim these 4 tax deductions even if you don't itemize
Student loan interest tax deduction is one of the tax breaks that clients can claim even if they opt for the standard deduction, according to this article in Motley Fool. Clients can also claim the tax deductions for contributions to their IRAs and health savings accounts even if they don't itemize deductions on their returns. Self-employed taxpayers who are claiming the standard deduction can further boost their tax savings by deducting 50% of their self-employment tax.

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