When you think about your taxes, your first impulse may not be to go to your workplace for help. But maybe that should change: Workplace financial benefits are becoming a home base for many areas of our financial lives, with many offerings that can have a real impact on your tax strategy — from income and investing opportunities to personalized financial guidance.
While your employer likely doesn’t offer tax advice (neither do we), they likely offer resources that can aid you in forming a comprehensive financial strategy that includes and optimizes your approach to taxes. As we wrap up the 2024 tax season and look ahead to next year, consider how these four simple steps can potentially help you use your workplace benefits to get organized and stay ahead of the game:
Any investments you hold can have an impact on your taxes, including employer-sponsored financial benefits like a retirement plan, equity compensation, health savings accounts (HSAs) and more. The choices you make in your workplace accounts may have tax consequences and opportunities, so investigate how your financial workplace benefits can play a part in your financial big picture.
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Customize your participation in workplace benefits to align with where you are today in your financial journey and how these resources can help you reach your long-term goals. Start with the basics: If your employer matches contributions to retirement accounts, you may consider contributing enough to receive the full match. If you have company stock or retirement investments, you may want to keep track of your overall asset allocation, performance and any realized profits or losses.
Along with financial benefits, many employers also work with their providers to offer financial education through on-demand webinars, reading and more to help you gain greater confidence and familiarity with financial themes — including tax literacy. Plug in and learn more about potential tax strategies like tax-loss harvesting, charitable giving, non-qualified deferred compensation and more.
2. Maximize participation at work.
If your employer offers financial benefits, gather all the information you can from your employer to help you organize and position yourself more strategically for taxes — and beyond. Find out where and when you can get important workplace-related tax documents to give to your tax preparer, from your W-2 to additional forms from retirement, equity, financial wellness or other workplace accounts.
If you receive equity-based compensation or are a participant in an employee stock purchase plan (ESPP), your taxes may get a bit more complicated. Common types of equity compensation such as stock options, restricted stock units (RSUs) and ESPPs all receive different tax treatment, and you’ll need different tax forms depending on your equity type and account activity.
For example, if you sell any equity compensation, you’ll likely receive a Form 1099-B. Or, if you purchase or sell company shares through an ESPP, you’ll receive either a Form 3922 or Form W-2. Your employer’s equity compensation provider can connect you with equity stock plan customer service professionals to help you find more information, and perhaps even help refer you to tax or financial advisers to help you navigate your wider financial strategy.
For your workplace retirement accounts, if your employer offers any dollar-to-dollar match for the contributions you make, consider maxing it out: Employee contributions can usually be made on a pretax basis, which can lower your taxable income for the year. And it’s not too late into tax season to make strategic moves: Most people have until April 15, 2024, to make potentially tax-deductible contributions to an individual retirement account (IRA) for the 2023 tax year.
Lastly, if you are enrolled in a qualifying high-deductible health plan (HDHP), you may be eligible to contribute to an HSA —and those contributions may also be tax-deductible. Earnings in most HSA accounts grow income tax-free, while distributions can also be income tax-free if used toward qualified medical expenses. You should have until your tax filing deadline without extensions to make contributions to your HSA.
The paperwork is important, but it’s not the whole story. Be sure to check with your employer and your legal and tax professionals on your individual situation and to find additional resources to help you plan.
3. Give back at work.
If you’re passionate about giving back, the workplace may also be able to help you meet your charitable giving goals. For example, benefits focused on charitable giving are growing in popularity, with some employers offering options like a donor-advised funds (DAFs), which can be used to execute certain types of tax strategies. A DAF allows you to donate stock, mutual funds or other eligible assets you own. By donating to a DAF, like donating to any public charity, you may be eligible for a federal income tax deduction if you itemize deductions (subject to limitations). You also have a say as to where and when the DAF makes grants.
You might also consider making a qualified charitable distribution from other workplace benefits accounts you may have available. For example, if your employer offers a retirement account and you’re of an age where you are required to make minimum withdrawals, you can gift your retirement distribution to charity and potentially receive a charitable tax deduction. Check with your employer about what charitable giving-related benefits they may have on tap.
4. Get personal at work.
One of the keys to building wealth over time is making sure you’re able to retain more of what you earn — much of which comes, of course, through the workplace. So, it’s important to consider the potential tax impact of all your benefits decisions. Speak with your employer to learn more about any workplace financial benefits they offer and what information is available to help you integrate those offerings into your broader tax and financial strategy.
To help you sort through what can be an overwhelming series of choices, many workplaces also provide access to personalized financial coaching, financial advisers or individual planning platforms as a part of their financial benefits. If available, use all these resources to build a thoughtful investment strategy.
Depending on your unique tax needs, connecting with a tax professional through the workplace can help you craft and execute a personal tax-aware financial strategy. Especially if you have complex tax planning needs or equity compensation, connect with your workplace financial benefits provider to find out what resources they can offer. If you do choose to work with a professional, ask what strategies they might recommend to help you reduce your tax liability and whether your workplace benefits can play a part.
This material has been prepared for informational and educational purposes only. As such, Morgan Stanley Smith Barney LLC (“Morgan Stanley”) is not acting as an investment advisor as defined under the Investment Advisers Act of 1940, as amended.
This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
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