Tax season is over! But our work is never done.

Most of you have filed your 2021 tax returns and said “goodbye and good riddance” to tax season.
You probably won’t be thinking about taxes again until next year.
And that’s fine . . . .you deserve a break from the stress of tax season.

We, on the other hand, work all year round to help make sure that all aspects of your financial plan and investments are functioning in the most tax-advantaged ways possible.
Particularly with the new tax laws, we want to be extra prudent in reviewing your portfolios and plans.

To that end, if you haven’t already sent us copies of your 2021 tax returns, please do so as soon as possible.
Reviewing your 2021 returns will make it easier for us to determine what tax strategies are best for you for the remainder of 2022.

We want to do everything we can to help make sure you avoid any unnecessary penalties or fees.
But we can’t do that without having copies of your 2021 tax returns.

We review the following twelve (12) items in detail from your tax return for tax planning purposes. Our thoughts are sent to you along with your Tax Observation Report, which presents numerous key findings from your tax return. Read more to find out what we consider when analyzing your tax return.

1. Marginal Tax Rate
We review your marginal tax rate. The marginal tax rate is hte tax rate paid on the next dollar of income, so it gives us an idea of which tax bracket you are in and it assists us in tax planning, such as whether we should take an IRA distribution in a “low income year.”
2. Average Tax Rate
We review your average tax rate. The average tax rate is arrived by dividing the total tax paid by total income. This helps us to better understand your overall tax picture.
3. Carry Forward Losses
Carry forward losses moves your capital losses (from sales of stock) to a future year to reduce future tax liabilities. This can provide a great planning opportunity.
4. IRMAA Surcharges
Medicare Income-Related Monthly Adjustment Amount (IRMAA) is the extra surcharge based on income and added to your Medicare premiums. These additional charges can be sneaky, and we look to decrease income (where possible) and otherwise plan around them.
5. Capital Gains
Long-term capital gains are taxed at a more preferential rate than your ordinary income, which is helpful when selling stocks.
6. Qualified Dividends (of Total Dividends)
Qualified dividends are dividends that are taxed at capital gains rates as opposed to your ordinary income rate, which is generally higher. The higher the percentage of qualified dividends to total dividends, the more tax-efficient your portfolio is.
7. Roth Conversion Opportunities
Have you considered a Roth conversion to guarantee tax-free and RMD-free income in retirement? We use industry-leading technology to find the optimal Roth conversion amount that would allow you to build your Roth balances and fill your current marginal tax bracket “bucket.”
8. Itemized vs. Standard Deductions
Did you take the Standard Deduction when taking an Itemized Deduction could have been more beneficial for you? We consider planning strategies (such as “bunching”) to make sure Itemized Deductions are taken when appropriate.
9. Net Investment Income (NII) Tax
The additional Net Investment Income (NII) tax is for single individuals who have MAGI above $200,000 and married taxpayers who have MAGI above $250,000. The income over the limit is taxed at 3.8% and is often a surprise to higher income clients.
10. Qualified Business Income (QBI) Deduction
The Tax Cut & Jobs Act (TCIA) of 2017 includes a 20% tax deduction for pass-through businesses (subject to several requirements). All small business owners should be aware of this tax savings opportunity.
11. Phaseouts
There are fifty (50) tax credits that are available, but they are subject to a variety of income phaseouts. We believe you should take advantage of all available tax credits and that you should know whether you are in a phaseout range so we can plan accordingly.
12. Review of Credits and Deductions
We believe you should be aware of your income as well as all of the tax deductions and tax credits you claimed.

We take our clients’ tax return analysis and reviews very seriously. The above twelve (12) items are crucial for clients to know about their financial status. After all, a tax return is the most accurate documentation people have in terms of income and taxes paid. We do our best to work with you and present the information in the most helpful way possible.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through IFG Advisory, LLC, a registered investment advisor. Fero Financial and IFG Advisory, LLC are separate entities from LPL Financial.

Fero Financial and LPL Financial do not provide tax advice or services. Please consult a qualified professional regarding your specific situation.

Click here to download a PDF of this report.

Work With a Certified Professional

Rebekah J. Fero, CFP®, AIF®