By Harness WealthAdvisor Insights — February 11, 2020

Tax Tips in 2020: The Importance of Planning Throughout the Year

Popular tax topics in 2020, and advice from a tax expert on how to develop a more holistic strategy beyond just filing on Tax Day.

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Today we’re speaking with Sarah Schiltz, CPA, MSA, Partner, and Tax Department Chair at MarksNelson, one of the many excellent tax advisory firms on the Harness Wealth platform.

Sarah specializes in partnership taxation, real estate accounting and tax services for high net-worth clients. She joined MarksNelson in 2005 as a staff accountant and became the youngest female partner in the history of the firm.

Sarah, thank you for taking the time to help our readers during the busiest time of year for tax professionals!

Hello Sarah. How are 2020 tax filings going? What have been some common topics discussed with your clients?

We like to remind our clients that it’s important to proactively stay in contact throughout the year to work with them on an ongoing basis. It helps us understand what type of transactions they may have on the horizon and to put in place the right strategies to minimize tax liability.

Examples include discussing with small business owners what reasonable compensation would be for their services while looking to maximize the new 20% Qualified Business Income Deduction. This type of conversation needs to occur at the right time of the year, before too much or too little compensation is paid.

We also discussed with many of our clients the eliminated Employee Business Expense deduction on Schedule A, and what they can do to remedy this elimination if they are an S Corporation owner. For those clients who did not incorporate this type of planning into 2018 or who we are onboarding as new clients in 2019, we are working with them to get it implemented in 2019 and 2020.

The main questions and concerns we heard throughout 2019 and even now are related to how the new tax law changes would impact clients tax planning and filings.

What are some of the ways that you seek to proactively advise clients (vs. passive tax compliance activities)?

Our goal is to be in communication with our clients throughout the year. This comes not only from phone calls and meetings, but also communication via e-blasts for new legislative changes that may impact them. We also send out monthly newsletters to advise clients on anything from trends in their industry, legislative changes, to changes in technology.

For instance, I recently had a client that was looking to relocate one of their operating companies to an area closer to the owner’s home. I knew that this was in a different state, so I was able to bring in our Credit & Incentive team to meet with the client as well as our Real Estate team. We were able to consult with the client on buying ground in an Opportunity Zone and we also negotiated a fantastic incentive package from the state. Had we not been involved in these conversations, this type of transaction may not have taken place.

When a new legislative change comes out it might prompt us to reach out directly to specific clients that it may impact to discuss the potential opportunity around that change. Or when a client mentions expanding their business, we will research R&D credits for them.

What are the future items clients should be considering from a tax perspective as they plan ahead for 2020 tax filing in 2021?

Clients should be working with their tax professionals regarding:

What is the best piece of advice you share with your clients?

Be honest and open with me and tell me more than you think I need to know. Tax is all about strategy and bringing it into the context of the law.

The more information I have access to in advance, the better I can advise you and provide you with great service. I want to be able to consult with clients before they form their companies or before they change the structure so we can sit down and understand what they want to accomplish 5, 10, 15 years from now.

I want to talk with them about what they think their exit strategy may be so that we can structure the deal appropriately to achieve that on day one.

After a transaction or year closes, there is less and less that can be done to constructively lower your tax bill. Communication and good relationships are key.

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