Questions to Ask Your Tax Accountant This Tax Season

We hope this finds you and your family well and that 2023 has had a great start for you. For many of us, the arrival of a new year has its traditions: making resolutions, taking down holiday décor, returning to routines, and getting paperwork together for your income tax return.

Preparing for filing your taxes goes beyond collecting earnings statements and receipts from charitable deductions. It’s an excellent opportunity to ask questions of your tax professional and learn more about the ever-evolving tax code.

Below is a list of questions that may shed light on common tax-related topics. The questions are designed to help guide a conversation with your tax professional but are not a replacement for real-life advice. Be sure to ask your tax professional if you have overlooked any issue that may affect your situation.

Q. I heard the Required Minimum Distribution (RMD) rules changed. Will this impact me?

Note: Recent legislation has changed RMD rules, which govern at what age a person must begin withdrawing from retirement accounts.

Q. Am I eligible for a Roth conversion? Can you estimate my tax liability if I converted my traditional individual retirement account (IRA) to a Roth IRA?

Note: Some people consider converting their traditional IRA to a Roth IRA. It’s important to understand the pros and cons of a conversion, if a conversion is a strategy to consider, and if you are eligible to do so.

Roth IRA distributions must meet a 5-year holding requirement and occur after the age of 59½ to qualify for the tax-free and penalty-free withdrawal of earnings. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Q. Can I contribute to both an employer-sponsored retirement plan and a Roth IRA? Is there a limit to how much I can contribute?

Note: Roth IRA contributions are phased out for taxpayers with an adjusted gross income (AGI) above a certain amount.

Q. I've heard the phrase "Superfunding a 529 Plan?" Is this a strategy that my family should consider?

Note: Contributing to a 529 for children or grandchildren can be an effective way to help pay for their education. In the Internal Revenue Code, the "superfunding" provision of the 529 regulations allows for large 529 Plan contributions using 5-year gift tax averaging.

A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. The state tax treatment for 529 plans is only one factor to consider before committing to a savings plan. Also, consider the fees and expenses associated with the particular plan. Whether a state tax deduction is available will depend on your residence. State tax laws and treatment may vary. State tax laws may be different from federal tax laws. Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty tax.

 Q. I'm considering buying an electric car in 2023. Would I be eligible for any tax credits?

Note: The U.S. government offers tax credits to incentivize individuals to purchase these vehicles. In 2023, the Internal Revenue Service website says, "You may qualify for a credit up to $7,500 under Internal Revenue Code Section 30D if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032."

We hope this information has been helpful. We'd be happy to connect with your accounting professional to discuss your situation in more detail.

Please let us know if you would like more information. Our office may have some additional tax resources that may be helpful.