When your clients welcome a new bundle of joy into the world, they’re probably not thinking about the financial adjustments and decisions that they will need your help to make. Of all the things new parents have on their minds, income tax changes and college savings accounts are likely not near the top of the list. As an accountant, though, you may need to draw your clients’ attention to these matters and help them make the financial decisions and paperwork changes necessary to accompany this major life change.
New parents are also taxpayers. Like many taxpayers, they might not know what credits and deductions they are eligible for – and specifically, what credits accompany their new child. Research has shown that more than half of taxpayers surveyed don’t know the deductions they are eligible to claim as a result of having a new baby or another life event, Accounting Web reported – and that means these taxpayers could end up never claiming the money that’s theirs. For financially strapped parents paying for diapers, baby clothes and toys and other gear, having that extra money can really make a difference.
Even those taxpayers who know there are deductions might not know how much those deductions are worth. After all, 62 percent of taxpayers surveyed didn’t know that they were eligible for $1,000 per child due to the Child Tax Credit.
Setting Up Savings Accounts
When your clients look into the eyes of their newborn, college may seem too far away to worry about now. Yet starting early can make a big difference when it comes to saving for goals like a child’s college education.
It’s not just when parents begin saving that matters, either, but how they begin saving for their children’s education. Using the wrong kind of account to save for college could cause problems and leave kids with less financial aid and a bigger tuition burden, Bankrate reported.
However, many new parents don’t know that they will need to set up a specific kind of account for college savings or what the consequences of choosing the wrong account are. You can help by asking your clients about their short-term and long-term savings goals. If saving for their children’s education is among these goals, you can help them understand options like 529 college savings plans and Roth IRA plans.
Accountants help their clients prepare for major life changes of all kinds, and a new baby is no exception. From knowing what credits and deductions to claim on their income taxes to figuring out the best way to reach their college savings goals, there are plenty of financial decisions new parents will have to make, and they will need your help to make them. That’s why aspiring accountants need to develop their knowledge and skills in areas throughout the field of accounting during their studies – so they can eventually help their clients make informed and smart financial decisions.