SOURCE: BMO Harris Financial Advisors

March 28, 2014 08:05 ET

Eighty-Seven Percent of Arizonans Surveyed Are Confident in Tax Return Preparation, but Many Lack Knowledge on Tax Smart Investing

PHOENIX, AZ--(Marketwired - Mar 28, 2014) -

  • Almost half of Arizonans surveyed hire a professional to do their taxes
  • The overwhelming majority are confident that they take advantage of all tax breaks, but most admit they are not tax smart when investing
  • The majority of those expecting a refund for the 2013 tax year plan to use the money to pay household bills and/or reduce their overall debt load

BMO Harris Financial Advisors today announced the results of a national tax study which found that almost half of those Arizonans surveyed (44 percent) hire a professional to prepare their tax returns. Additionally, the overwhelming majority (87 percent, slightly above the national average of 83 percent) are confident that their completed tax returns will take advantage of all of the tax deductions, tax credits or other tax savings that may be available to them.

Despite this sense of self-assurance, nearly half (45 percent, which is identical to the national average) admitted they are not knowledgeable about tax smart investment solutions designed to reduce their overall tax liability, including protecting their investments from a tax perspective and transitioning them in a tax-efficient manner to the next generation. Further, the study found:

  • Just 57 percent understand how capital gains are taxed.
  • Only 58 percent of respondents understand how dividend income is treated from a tax perspective. 

"If you want to make sure you are getting the maximum return possible from your investment portfolio, it's important to understand the tax-smart investment options that are available to you," said Larry Skolnik, Regional Sales Manager, BMO Harris Financial Advisors. "It's also critical to understand how an investment could be impacted from a tax perspective before you make that investment decision."

A financial professional can play a critical role in making an investment portfolio more tax efficient. For example, BMO Harris Financial Advisors works with clients to determine investment solutions which best fit their specific needs and goals. This may include reducing one's tax liability and transitioning assets to the next generation in a tax-efficient manner.

What are Arizonans planning to do with their tax refunds this year?

The study also examined what those who expect a tax refund (slightly less than 80 percent) plan to do with the money:

  • Thirty-seven percent plan to pay bills and/or put the money towards credit card balances and other debt (not including a mortgage).
  • Thirty-one percent will save or invest.
  • Twenty-one percent will fund vacations or purchase leisure items.
  • Twelve percent will spend on home renovations.
  • Seven percent will pay down their mortgages.

"Although everyone's financial situation and priorities are unique, it's great to see that so many people who are expecting to receive a tax refund will be using it to pay for basic expenses, reduce their debt and/or save for the future," added Mr. Skolnik.

Key National Findings

  • Forty-eight percent of those Americans surveyed are preparing their own tax returns.
  • The vast majority (83 percent) are confident that their completed tax return will take advantage of all tax breaks.
  • Just under half (45 percent) of the respondents admitted they are not knowledgeable about tax-smart investment solutions designed to reduce their overall tax liability.
  • Just 44 percent understand how capital gains are taxed and only 47 percent are familiar with how dividend income is treated from a tax perspective. 
  • Forty-two percent of those Americans surveyed who anticipate getting a tax refund plan to use the money to pay household bills/reduce their debt load; 35 percent will save and/or invest; 16 percent will fund vacations or the purchase of leisure items.

The survey was conducted by Pollara with an online sample of 1,000 Americans 18 years of age and over, between March 7th and March 10th, 2014. A probability sample of this size would be accurate to +/- 3.1%, 19 times out of 20.

About BMO Harris Financial Advisors
BMO Harris Financial Advisors, Inc., offers a comprehensive range of investment advisory products that include financial planning strategies and estate planning strategies to meet the financial needs of high-net-worth clients. Offices are located throughout the U.S. Learn more at www.bmoharris.com/financialadvisors.

BMO Harris Financial Advisors(SM) is a trade name of BMO Harris Financial Advisors, Inc. Securities, investment advisory services and insurance products are offered through BMO Harris Financial Advisors, Inc. Member FINRA/SIPC. SEC-registered investment adviser. BMO Harris Financial Advisors, Inc. and BMO Harris Bank N.A. are affiliated companies. Securities and insurance products offered are: NOT A DEPOSIT - NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY - NOT GUARANTEED BY ANY BANK - MAY LOSE VALUE.

Estate planning requires legal assistance which BMO Harris Financial Advisors and its affiliates do not provide. Please consult with your legal advisor.

United States Department of Treasury Regulation Circular 230 requires that we notify you that this information is not intended to be tax or legal advice. This information cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. This information is being used to support the promotion or marketing of the planning strategies discussed herein. BMO Harris Financial Advisors and its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors.

Contact Information