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A year-end tax checklist and guide for advisors and clients

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Individuals waiting until after the presidential election to begin their year-end tax planning election can wait no longer: The votes have been cast, and Dec. 31 is right around the corner. 

While there’s no sure way to predict what tax policy will entail under the new administration, there are timely strategies wealth holders can leverage now. With 2024 deadlines fast approaching and a tax sunset looming, sitting down with clients before January is more important than ever. 

Eric Boughner.jpg
Eric Boughner, chairman of BNY Pennsylvania and regional president of BNY Wealth

Jen Barker Worley Photography

Consider the following checklist when having these conversations.

Estate plans and gifting: Use it or potentially lose it

Much can change over a year, including a family’s circumstances or goals, making year-end a critical time to review and update wills, trusts and other estate planning documents. It’s also an opportune time to transfer wealth to heirs, especially under the Tax Cuts and Jobs Act’s current provisions. While the TCJA’s ultimate fate hinges on the actions by the new administration, any law that extends or replaces it would likely not pass until well into 2025, creating a limited window to act on current policies.

READ MORE: The policy changes financial advisors want to see after Election Day

Individuals should consider maximizing the current $13.61 million ($27.22 million for married couples) federal estate, gift and generation-skipping transfer tax exemption to transfer wealth and mitigate some of the estate and/or gift tax burdens. Wealth holders should evaluate allocating an increased generation-skipping tax exemption to trusts that are not fully exempt from the generation-skipping tax. Clients may also capitalize on the increased lifetime federal estate tax exemption by deploying spousal lifetime access trusts (SLATs), dynasty trusts or irrevocable life insurance trusts (ILITs). 

Those wishing to transfer wealth to loved ones should also take advantage of the 2024 annual gift exclusion, which allows for tax-free gifts up to $18,000 per individual, or a combined $36,000 per married couple, without counting toward their lifetime gifting exemption. This includes cash gifts and tax-free transfers on behalf of another individual, such as paying school tuition or medical expenses directly to the provider.

READ MORE: How a life insurance strategy could save some wealthy estates millions

Charitable gifting: Tax-efficient strategies

For clients wishing to pay it forward this giving season, several tax considerations should be factored into their strategies. 

Gifts to donor-advised funds may be used to secure a charitable deduction in 2024, while deferring a distribution to a public charity to a later year. Clients may consider “giving away the gain” — giving appreciated assets held longer than one year — to a public charity in exchange for a fair market value income tax charitable deduction while avoiding income tax on the appreciation and the 3.8% surtax on net investment income, if applicable. They may also combine multiple years of charitable contributions into a single year to exceed the standard deduction threshold required to fully deduct contributions. 

Additionally, those 70½ years or older may consider making a direct transfer from an IRA to a public charity while avoiding paying taxes on the distribution. 

It’s important to ensure any charitable contribution meets the strict substantiation rules. Failure to adhere to these has denied charitable deductions in recent cases.

Income tax: Accelerate income or deductions?

Clients have the option to accelerate income into 2024 to avoid potential tax rate increases in 2025. We recommend individuals defer net investment income or reduce modified adjusted gross income, or MAGI, to minimize or avoid the 3.8% surtax on net investment income. This applies to a MAGI over $200,000 for single taxpayers, $250,000 for married taxpayers filing jointly and $125,000 for married taxpayers filing separately. We also suggest reviewing the breaks in tax brackets for capital gains to determine if an individual or their family members may benefit from a 0% or 15% tax rate on long-term capital gains. 

READ MORE: Ask an advisor: How can I save my investments from taxes?

If a client’s itemized deductions will exceed the standard deduction, consider accelerating itemized deductions into 2024 in the 32%, 35% and 37% tax brackets, as they may be capped at a 28% tax benefit in the future. Similarly, consider deferring deductions if there is an expectation they will provide a greater benefit under the potential of higher tax rates.

Lastly, sit down and review income tax withholding and estimated tax payments. If clients are potentially subject to a penalty for underestimated payments, consider increasing their withholding from wages and bonuses in the fourth quarter.

Retirement plans: Maximize contributions and brush-up on RMDs

Forthcoming legislation may limit the size of retirement accounts, making now an ideal time to maximize contributions to 401(k)s as well as to traditional, Roth, simplified employee pension (SEP) and Simple IRAs. For those 50 years or older, consider making “catch-up” contributions to eligible contributions. 

Traditional IRA holders may also explore converting to a Roth IRA. While this will result in taxable income in 2024, assets will accumulate tax-free in the Roth IRA, allowing for tax-free distributions in the future when income tax rates may be higher.

Ensure clients review retirement account beneficiary designations and are familiar with the latest required minimum distribution rules. If applicable, clients should also take 2024 RMDs from traditional IRAs, SEP and Simple IRAs and most qualified plans.

READ MORE: Final IRS rules to IRA beneficiaries: Get going on those RMDs already

Investment considerations: Time for a portfolio checkup?

Year-end — or early in 2025 if the holiday season proves too hectic — is a good time to revisit investments to ensure they maximize tax efficiencies and are aligned with broader wealth goals. 

The “nice” list of reasons to rebalance portfolios includes: staying on track with goals whether it be selling overweighted assets; purchasing securities in underweight asset classes or adjusting future investments to compensate. 

Individuals may also offset the tax impact of any realized gains taken in 2024 by harvesting losses in the portfolio or realizing gains to offset losses. Any harvested tax losses not offset by gains in 2024 can offset up to $3,000 of other income with the balance carried forward to future tax years. 

The election outcome will be instrumental in shaping the future of tax and economic policy in 2025, which makes it all the more important to make a well-thought-out plan for your client today. Now is an important time to review these strategies to ensure alignment with clients’ broader financial goals.

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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