Tax Planning Strategies for Year-End Planning

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An accountant meets with clients to discuss tax planning strategies.

Taxes are an important and unavoidable financial aspect of life for both individuals and businesses. Accountants must think strategically when helping a client close out the tax year. Strategies for individual taxpayers and for businesses will differ; however, accountants in all cases must be aware of changes to tax laws and regulations and how those changes may affect clients.

As more individuals and businesses rely on accountants for tax planning strategies, more students may consider pursuing advanced education to achieve success in the tax profession. An excellent place to start is to explore programs such as an Online Master of Accountancy, which is structured to help students gain the knowledge and skills to create and oversee effective tax planning strategies.

A Look at Year-End Tax Planning Strategies

Tax rules that took effect in 2018 as a result of the Tax Cuts and Jobs Act of 2017 brought about multiple changes for both individual and business tax filers. This caused accountants everywhere to revisit and rethink year-end tax planning strategies.

Under the new law, individual tax filers generally have lower income tax rates, a higher child tax credit, and a lower alternative minimum tax (AMT). Increases in the standard deduction mean that fewer individual taxpayers will find it advantageous to itemize their deductions. Accountants may advise clients to “bunch” their deductions — to combine two years’ worth of charitable contributions in a single year, for example — to benefit from itemizing.

Tax planning strategies for individuals can also relate to retirement accounts, mortgages, and capital gains. Individuals can reduce taxable income by depositing money into a 401(k) or IRA account. The money in these retirement accounts won’t be taxed until it is withdrawn. Changes in the allowable home mortgage interest deductions may affect consumers’ decisions on borrowing. To strategize for a deduction, individuals should understand the new tax reform pertaining to specific mortgage ranges. Individuals may also take advantage of an opportunity to defer capital gains on investments in designated opportunity zones, according to Accounting Today.

Tax changes have also occurred for businesses. The corporate tax rate was reduced to 21%, the corporate AMT was eliminated, and business interest deductions were reduced, among other differences. Tax planning strategies for businesses typically relate to concerns such as net operating losses and business interest deductions.

Because tax laws and policies continue to change, accountants and their clients will need to regularly revisit tax planning strategies. A tactic that is optimal at the end of one year may not be helpful in the following year.

How Ohio University Can Help Students Become Trusted Tax Strategists

Students who are looking to become professional accountants would do well to look into Ohio University’s Online Master of Accountancy program. The program’s curriculum is designed to develop the competencies that are considered essential for implementing effective tax planning strategies. The following courses are especially important for aspiring tax planners:

  • Accounting Theory and Research — This course explores foundational elements of accounting theory that relate to financial accounting and reporting. Students review existing research and learn how accounting theory applies to standard financial reporting processes.
  • Advanced Tax Planning and Strategy — This course examines the sources of current tax laws and regulations and the impact of federal income taxes on corporations, partnerships, and other taxable entities. Topics include tax planning strategies. The course emphasizes the importance of research techniques, helping students better understand and solve tax problems.
  • Professional Ethics and Communication — Students in this course identify and resolve potential ethical issues within the accounting field and examine accountants’ civil and criminal liability. Students also practice oral and written communication as applied in the profession.

The Skills Needed for Optimal Tax Planning

While pursuing higher education and earning a professional degree in accountancy, students not only build on their foundation of knowledge, they also develop key new skills. Accountants need several core competencies to deploy effective tax planning strategies:

  • Advanced analytical skills, including a high level of numeracy, are essential.
  • Accountants should be able to exhibit mathematical and financial knowledge.
  • Effective communication is key, as an accountant’s job includes explaining complex laws and regulations to individuals who are not experts in the field.
  • Effective research techniques are used by accountants to stay up to date and adapt to new federal, state, and local tax laws as they evolve from year to year.
  • Accountants must be detail oriented and well organized to optimize tax planning as they examine financial statements and prepare tax returns.

Pursue a Master of Accountancy

As tax laws continue to change, accountants and their expertise will remain in high demand. According to the U.S. Bureau of Labor Statistics (BLS), employment for accountants and auditors is projected to grow 6% between 2018 and 2028.

Students who are interested in building on their accounting skills by pursuing an advanced degree are encouraged to explore Ohio University’s Online Master of Accountancy program. Learn more about how this program and its curriculum can help students develop the knowledge and skills to achieve success in creating, communicating, and implementing effective tax planning strategies.

Recommended Reading

Accounting Jobs That Put People in High Income Tax Brackets

Advanced Accounting Careers: How to Become a CPA

Cost-Effectiveness: Comparing Financial Accounting vs. Managerial Accounting

Sources

Accounting Today, 10 Year-End Tax-Planning Tips After Tax Reform

American Institute of Certified Public Accountants, Roadmap to Developing a Tax & Financial Planning Business

CNBC, 4 Ways to Cut Your Taxes Under the New Law

Inc., How to Reduce Your Small Business Tax Bill

Ohio University, Online Master of Accountancy Curriculum

U.S. Bureau of Labor Statistics, Accountants and Auditors

Windes, “Tax Planning Strategies for End-of-Year 2019”