You may not think twice about the connections between your CPA and wealth advisor — until a situation arises where you could have benefited from their collaboration. That is why it is important to make sure these two key professionals are working together for your maximum benefit in today’s complex tax environment. An accountant will have knowledge about current tax laws, as well as strategies for reducing your taxable income — including deductions and credits that could result in big savings at tax time. Meanwhile, a wealth advisor will be able to provide customized advice on investments that can potentially maximize returns while minimizing risk.
Here are three reasons why strong communication between your CPA and wealth advisor could benefit your finances.
Minimize Capital Gains Tax-Bite
As markets fluctuate and your risk tolerance changes throughout your lifetime, tax-smart financial planning can help ensure your portfolio is performing appropriately. Tax-loss harvesting is an effective technique for reducing capital gains tax liabilities to create long-term growth that can potentially maximize returns while minimizing taxes – a win-win situation. Many wealth advisors will implement tax-loss harvesting strategies at year-end, but in times of more intense volatility, it can be implemented more frequently throughout the year.
Collaboration between your CPA and wealth advisor provides a strong approach when it comes to managing this complex process, as each provides specialized expertise integral to achieving success with minimal taxation expenses incurred on your behalf.
Identify Opportunities on Your Tax Return
Your wealth advisor can play an important role in helping to optimize your wealth and make sure you’re taking full advantage of all available tax opportunities. A thorough review of your most recent tax return should be conducted at the beginning of a relationship – and each year after – as it reveals invaluable insight into what strategies may best benefit you. Such as, increasing contributions to employer-sponsored retirement plans or creating health savings accounts. In addition, this is key for individuals looking for guidance on how best to use their annual refund or guidance on adjusting withholdings if too much was paid out from prior returns.
Working in tandem, the goal here is to bridge the gap between tax planning and financial planning by these two professionals coming together to build a comprehensive plan for your future.
Increase Tax Efficiency of Your Estate Plan
Working hard during your lifetime paves the way for a secure retirement and gives you the opportunity to pass what you have built to future generations. That is why creating an estate plan is an important step, one that calls upon three trusted experts: wealth advisor, CPA and attorney. Their collaboration ensures any unexpected situations are thoughtfully prepared for while leaving more of your assets intact – exactly as intended – for those who will benefit from them in time.
Your wealth advisor can serve as an objective third party to communicate plans to other parties, answer questions and mitigate risks of your wealth continuing for future generations. They can advise on gifting strategies and special tax benefits before your passing and routinely remind you to keep beneficiaries up to date. With the tax landscape subject to change in the next year, your financial team should be formulating a plan for the gift tax exemptions set to sunset in 2025.
In 2023, financial services are no longer à la carte. Collaboration should happen on your behalf, and you should not be the one responsible for tying it all together. It is your wealth advisor’s job to ensure you are not missing any valuable opportunities because every financial decision you make ultimately has a tax implication.
Kyle Brownlee
CEO & Senior Wealth Advisor
Category: Financial Service Team, Leaders
