5 Ways Advisors Can Ease Clients' Tax Concerns Now

Advisors can also point out to clients that the IRS announced in March that it was "loosening the restrictions on those accounts" this year, she pointed out. As a result, plan sponsors can allow members to make changes to their health coverage elections, flexible spending accounts and dependent care coverage now, she said. So, if somebody didn't opt to get coverage by the normal deadline because they didn't need it at the time, but now suddenly do need it — maybe because a spouse lost a job — that person can now request it, she said.

3. Clarify CARES Act Tax Implications

Advisors should make sure they let clients know how they can take advantage of the CARES Act, White said.

The CARES Act has a few provisions related to charitable giving. First, it created an above-the-line $300 deduction for charitable contributions. As a result, clients who can't itemize deductions can still receive a small deduction for a donation. The act also increased the deductible limit for cash gifts to a public charity from 60% of adjusted gross income to 100% of adjusted gross income.

Perhaps most significant under the CARES ACT is the waiver of required minimum distributions for 2020 for those eligible to take RMDs this year. Normally, one must withdraw RMDs at a certain age or under circumstances. Not this year, White noted. "The CARES Act also waives the 10% early withdrawal penalty (for individuals under 59 ½) for retirement account distributions up to $100,000 for coronavirus related purposes," she said.

The CARES Act, meanwhile, also has a provision that allows employers, including the self-employed, to defer the payment of the employer portion of Social Security taxes due by the end of 2020. Fifty percent of the deferred payments would need to be made by the end of 2021, with the other half by the end of 2022. Advisors should make sure their clients who may be impacted by this are aware of it, especially those clients who are self-employed.

4. Consider a Move

It might make sense for an advisor's client to move to a different state that has low property taxes, or one that has low or even no income taxes, especially if they are close to retiring or have already retired, White said, or if they have just lost a job due to the pandemic. So it might be a good idea to point this out to a client who lives in a high-tax state such as California or New Jersey, White noted.

Florida might not be so attractive right now due to the spread of the coronavirus there. But Nevada is another state with no income tax that might be a good choice.

5. Factor in Potential Election Outcomes

Make sure clients' portfolios are prepared regardless of the outcome of the November election, White noted. And, circling back to the first point, she said "now is the time" to start planning for this — not after the election.

A lot of it comes down to where your clients live and how much wealth they have. For example, it is widely expected that if the Democrats win back the White House and the Senate, while holding on to the House, they will look to make significant changes to the sweeping tax overhaul enacted in 2017 and boost income and estate taxes on the highest earners, as well as raise corporate taxes.

Regardless of the election's results, however, White warned that costs related to the pandemic may require income taxes to rise, and a reduction in federal estate and gift tax exemptions could also be required.

— Related on ThinkAdvisor:

• IRS Extends RMD Rollover Relief Under CARES Act
• IRS Expands Eligibility for CARES Act Retirement Distributions
• Navigating the Twists in PPP's Loan Forgiveness Rules