Addepar can help optimize your clients’ tax strategies during this tax season — and beyond. Here’s five ways you can use Addepar to simplify tax preparation:1

1. Leverage Addepar’s tax-related attributes

With Addepar, view and report on multiple tax-related attributes, such as realized gains, unrealized gains, disposed costs and proceeds. These detailed reports empower you to:

  • Provide your clients with an early view of their taxable values

  • Help your clients understand their realized and unrealized gains

  • Identify potential capital gains or distributions well ahead of tax time, reducing surprises

Granular reporting capabilities also allow you to track transactional-level data, ensuring clarity on upcoming transactions or corporate actions. By maintaining an in-depth understanding of transactional data — whether it flows into Addepar via feeds or is manually input — advisors can deliver precise insights to clients and their accountants.

2. Set your preferred closing method

Addepar’s flexibility allows you to customize your clients’ preferred closing method within the Firm Administration settings. Our built-in firm-level default is First In, First Out (FIFO), but you can override the default using the Default Closing Method attribute. 

Updating the firm defaults will automatically update all views to the new default closing method firm-wide. You can also choose to set the closing method at the granular level by account. 

Closing method options within Addepar include FIFO, Last In, First Out (LIFO) or Average Cost for Canada. These settings enable users to improve consistency and accuracy in reporting gains, losses and other tax-relevant data — giving accountants and clients the information they need to make informed decisions.

3. Establish a tax lots maintenance routine

Tax lots are the foundation for all tax-relevant metrics within Addepar, including cost basis, realized gains, proceeds and disposed costs. To yield accurate calculations, it is essential to maintain and audit tax lots on a routine basis — ideally weekly. Proactive tax lot maintenance enables:

  • Accurate year-end reporting

  • Clear tracking of adjustments, such as returns of capital

  • Easy auditing of cost basis and related attributes

4. Provide year-to-date (YTD) summaries year-round

Addepar’s capabilities aren’t limited to year-end reporting. Advisors can generate YTD summaries at any point during the year, giving clients and their accountants valuable insights before the year ends. These reports allow your clients to:

  • Make additional estimated tax payments if needed

  • Maximize contributions to IRAs, 401(k)s, HSAs or donor-advised funds

  • Harvest losses to offset capital gains

  • Plan charitable contributions tied to required minimum distributions (RMDs)

5. Improve tax reporting on the total portfolio

Cost basis accounting is a newer innovation on the Addepar platform, developed in response to client needs in Canada. We also have a services team that specializes in cost basis reconciliation and can either enable and train you on this functionality in Addepar, or simply set it up for you. 

Most custodians send tax lot data to Addepar which automatically populates the cost basis and relevant tax attributes. Within the platform, you also have the flexibility to manually maintain tax lots to address custodial errors. Additionally, you can manually maintain cost basis on alternative assets not fed through custodians, enabling you to report on the total portfolio cost basis.

Help your clients avoid surprises at tax time and make informed tax decisions throughout the year with Addepar. To learn more, contact us.

References:

  1. The information presented above should not be construed as legal, tax, accounting or any other professional advice or service. You should consult with a tax professional familiar with your (or your client's) particular factual situation for advice concerning specific tax or other matters before making any decision, and to double check any output from an electronic system.