Eight in 10 Affluent Americans Use Their Tax Return to Guide Financial Plan: AICPA Survey
Mike about Money | Tax Return Financial planning
The stress of the 2017 tax-year filing deadline has passed and, though many Americans may be eager to put away their financial records, now is the perfect time to plan for the future. Instead of filing and forgetting it, the American Institute of CPAs (AICPA) encourages Americans to use the information in their tax return to develop a plan that will put them on the path to reach their financial goals.
According to a survey conducted online by The Harris Poll for the AICPA before the new tax law passed, nearly 8 in 10 affluent Americans (78 percent) said they are likely to use the information on their tax return to guide their financial plan.
This underscores the bridge between taxes and financial planning. A tax return can double as a roadmap to a more prosperous financial future. In it, Americans can find details of their cash flows, important investment information, insights to retirement and estate planning and identify overlooked strategies to help them achieve their financial goals. With the significant changes brought about by the Tax Cuts and Jobs Act now in effect for the 2018 tax-year, Americans should revisit their financial plan while all their documents are readily available.
“By not taking advantage of various tax planning strategies, Americans could be leaving money on the table every year that could have gone towards their children’s education, their family’s healthcare savings, or towards retirement,” said Andrea Millar, CPA/PFS, director – financial planning, Association of International Certified Professional Accountants. “In today’s dynamic tax environment, taking some time after tax season to ensure your financial plan is in synch with the current law will allow you to feel more confident you’re on track to meet your financial goals.”
The survey found nearly a quarter of affluent adults (23 percent) received a notice from the IRS that they have overpaid taxes in the past 10 years and were owed a refund. In addition, 14 percent underpaid and owed the IRS money. Over or under withholding payroll tax can be a strategic move. But winding up with a big tax bill or a large refund can also indicate that adjustments are in order. And with updated withholding tables from the new tax law in effect, now is a perfect time to do this.
While tax law often changes, life events such as having a child, divorce or purchasing a home can also have a major impact on an individual’s tax situation. Alarmingly, less than half of affluent adults (46 percent) said it is likely that a major life event would cause them to adjust their financial plan to be more tax efficient. Of those who would be likely to make changes, the leading causes cited were health issues (60 percent), followed by retirement (52 percent), becoming disabled (48 percent), getting divorced (40 percent) and having children (37 percent).
“With the new tax law in effect, tax planning strategy is going to be very different this year,” said Millar. “Every individual’s personal financial situation is fluid and requires periodic adjustment. Major life events like having children, getting married or even switching jobs can be a good opportunity to sit down with a CPA financial planner to develop a holistic financial plan.”
The survey found that affluent adults appreciate the value of a financial planner with substantial tax expertise. By nearly a nine-to-one ratio, affluent Americans (53 percent) say working with individuals, such as CPA financial planners, would make them more likely to reach their financial goals (versus 6 percent less likely). Financial planning is not just for the wealthy. Every American can benefit from knowing where their money is going and taking advantage of opportunities to incorporate planning strategies available to them in the tax law.
With tax-filing season having just concluded, CPA financial planners suggest Americans review their returns and see if any the following opportunities make sense for them:
For more information on how tax reform will affect tax filing next year, click here.
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About the American Institute of CPAs
The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 418,000 members in 143 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.
About the Association of International Certified Professional Accountants
The Association of International Certified Professional Accountants (the Association) is the most influential body of professional accountants, combining the strengths of the American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA) to power opportunity, trust and prosperity for people, businesses and economies worldwide. It represents 650,000 members and students in public and management accounting and advocates for the public interest and business sustainability on current and emerging issues. With broad reach, rigor and resources, the Association advances the reputation, employability and quality of CPAs, CGMAs and accounting and finance professionals globally.