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Tax Prep is an Opportunity in Disguise

If you are like me, preparing for tax season is not your favourite pastime. However, compiling your 1099 documents and preparing your annual tax organisers can help prioritise your financial to-do list and remind you of areas where you have been procrastinating since last April. Here are a few suggestions to make the most of this less than pleasant task:

  1. Make a list of all your household investment accounts and aim to consolidate where possible. For example, a 401(k) or 403(b) can technically be transferred into an IRA [though you should always speak to an advisor first to ensure it is the right decision for you]. By creating one primary account, you could be streamlining your recordkeeping and your investment strategy at the same time. In addition, you would be simplifying your affairs for retirement or for your beneficiaries in the event of your death. Also, include a list of the accounts with your estate planning documents to show a clear picture of your total net worth. Your heirs will thank you!
  2. Consider eliminating superfluous bank accounts. Do I really need an account at Barclays, Lloyds, HSBC, Bank of America, Citi?…you get the idea. Even if it means short-term pain of switching direct debits or actually going into the branch to close down an account, you will be glad you took the steps next year when you go to prepare your FBAR.
  3. Create structure in your finances by setting up scheduled or systematic investments. For example, think about making your IRA contribution at the same time every year so that you don’t miss the deadline. Building your SIPP contributions into your monthly cash flow so that they become a regular part of your expenditure can also help instil discipline into your budget.
  4. Keep good records! Making non-deductible IRA contributions or using foreign tax credits in conjunction with UK pension contributions means there is basis in these accounts (i.e. an after-tax balance) that could help reduce the taxable portion when distributions are taken in retirement. However, if you don’t have good records or file the right forms, you could end up paying significantly more tax than necessary as you won’t be able to demonstrate the amount that is return of capital so make sure you discuss this with your tax specialist.
  5. Set short-term goals. We are all busy, and even though we may have the best of intentions, life often gets in the way of our very long to-do list. Set monthly or quarterly financial goals to help maintain momentum and increase the likelihood of sticking to your plan.

I hope this is helpful, but remember that your individual needs and circumstances are unique so make sure you consult a specialist before making any investment or tax decisions.


Ashley Scher, CFP™
Investment Adviser
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