Tax season is upon us! In a recent episode of the Unfiltered Finance podcast, I had the opportunity to interview Ed Richter, a Certified Public Accountant (CPA) and Senior Financial Advisor and Partner at Apella Capital, LLC about what investors should know about taxes for 2020 & 2021.
Among the items you should be aware of:
Stimulus is a significant issue for those that received payments in 2020, and promises to be as well for any payments received in 2021, and taxpayers should be sure to pay attention to the ramifications for filing
Requited Minimum Distributions (RMDs) were suspended for 2020, but have been reinstated for 2021. There are a variety of options for investors who took distributions from retirement accounts in 2020, and those taxpayers who did so should seek out professional assistance to ascertain the best strategy for their situation.
Research suggests that there are several areas where investors awareness of taxes is important, namely in cost-effective implementation, asset location, and withdrawal strategies.
However, most investors, according to Richter, “almost uniformly, are not aware of the importance of locating assets in the right place to maximize the tax benefits.” The costs associated with these can mean the difference between successful and mediocre investment results.
This is why he recommends investors schedule an annual tax planning session with their financial advisor to ensure that their overall financial plan, and investment portfolio, are optimized for their unique tax situation.
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