Tax tips for the rest of the year - Michael Smeriglio

Now that your taxes are done, consider these tips for the rest of the year

Article Published  by:

Another tax-return filing season is basically in the bag, and the last thing you want to think about any further is taxes. But it’s not too early to start planning ahead.

These key tips might bear fruit down the road, especially with taxes still fresh in your mind:

Review your tax return with some skepticism
It’s often a good idea to look at your just-completed federal and state tax returns, especially if you had someone prepare them for you.

Among possible action items: Contribute more to retirement plans, check for additional deductions and re-evaluate your paycheck withholdings (and, if relevant, estimated tax payments).

One caveat is that your situation might look a lot different in 2018 compared with 2017 as a result of tax reform. In particular, the increase in the standard deduction could mean a lot fewer people will itemize.

This will create opportunities to “bunch” deductions — doubling up on expenses to qualify for deductions one year while skipping the next — said Paul Jacobs, a certified financial planner and enrolled agent with Palisades Hudson Financial Group.

For example, bunching works well with charitable deductions, for which taxpayers have considerable flexibility in terms of the amounts they donate, and the timing.

Ponder capital losses
With the stock market up sharply for most of the prior nine years, investors didn’t have many money-losing positions in their portfolios.

That’s not necessarily the case anymore, with the market spending much of 2018 in the red. It thus might make sense to harvest some money-losing positions and reinvest the proceeds in something else.

Basically, realized losses offset realized gains for tax purposes. To the extent you have losses that exceed your gains, up to $3,000 of the excess can be deducted against ordinary income annually.

Net losses beyond $3,000 can be carried forward to future years. Those rules, and most other provisions related to capital gains and losses, weren’t affected by tax reform, said Mark Luscombe, a principal analyst at tax researcher Wolters Kluwer.

Consider Roth conversions
Roth Individual Retirement Accounts are nice. In general, withdrawals from these accounts come out tax-free. Roth withdrawals thus won’t push you into a higher tax bracket, and they won’t potentially make your Social Security benefits taxable (assuming you are drawing Social Security).

The notable drawback when you move or “convert” traditional IRA money into a Roth is that you must pay taxes on the amount that you’re transferring.

However, with the stock market flat to lower, now might be a reasonable time for that. Also, thanks to tax reform, ordinary income-tax rates have been shaved, so the tax bite could be a bit smaller than in the past.

If you decide to do a Roth conversion, use non-IRA money to pay for it.

“Having to use converted funds to pay the tax on a conversion is a huge disadvantage and will generally not pay off,” noted Ed Slott’s IRA Advisor newsletter.

One factor working against Roth conversions is that Congress last year did away with the option of cancelling or “recharacterizing” a transfer after the fact, Luscombe noted. So if you’re going to do a conversion, make sure it’s the right move.

Get organized
It’s frustrating to stop what you’re doing when preparing your tax return, to search for receipts and statements. That’s one reason some organizational foresight can help.

It’s smart to have a good record-keeping system for filing receipts and statements throughout the year. Make copies of your returns and put them in a safe place.

If you have electronic copies, consider backing them up on thumb drives or other devices that are separate from your computer (which can get stolen or hacked).

The general rule is to retain returns and supporting documents for at least three years, though certain items should be kept longer, such as statements showing how much you paid for your home or investments, especially if you haven’t sold them yet.

The IRS offers suggestions for how long to retain records at

Devise a tax-refund strategy
If you’re like most people, you received a tax refund and have already spent it, used it to pay down debt or placed it into savings. Refunds represent a large chunk of change for many people — sometimes the largest amount of cash received all year.

One potential problem ahead is that withholding amounts could drop for a lot of people, implying their refunds next year also could be lower. If you rely on refunds to put your finances in order, it might be time to come up with a backup plan.

Also, decide whether you want to keep getting large refunds, if that’s the case. Yes, refunds are nice, but they also represent interest-free loans to Uncle Sam.

Refunds imply “you paid too much to the government during the year and missed out on the income or investment appreciation you could have earned,” said Jacobs.

Then again, you might wind up having too much money withheld, given that the new withholding rates for 2018 didn’t take effect until around mid-February. Luscombe suggests checking the new withholding calculator at to see where you stand.

Watch for state-level changes
Tax reform enacted at the federal level will affect state tax policies, too. More than half the states tie their tax codes to federal rules and frequently make adjustments based on what happens in Washington.

Tax reform removed various exemptions and deductions at the federal level but also lowered federal income-tax rates. Consequently, many states will need to cut their own tax rates to keep residents — such as those who no longer find it worthwhile to itemize — from paying more.

“States will look to an array of legislative and policy options to respond to the (projected) revenue increases,” predicted credit researcher Moody’s. Some states might lower their own income-tax rates.

According to Moody’s, states with large projected revenue increases as a result of federal tax reform include Michigan, Nebraska, Georgia, Colorado, Minnesota, Maryland, Arizona and New York.


Michael Smeriglio III is a financial specialist. A licensed CPA since 1985, Mike has been providing tax preparation services to individuals and businesses for more than 30 years through his firm located in Greenwich, CT.