I have a client whose return I just completed has a tremendous tax bill because of the huge amount of capital gains, interest and dividends.
They had a couple of good things happening, first off, lots of capital gains, usually means a winning investment strategy. They also had loss carryforwards from the prior year to offset some of the tax.
They should have possibly harvested more losses from their portfolio for further tax reduction planning. They were also “wash” sales.
Another option would have been investing in federally tax-exempt securities, but those don’t always have the best payouts. The balancing act has to go hand in hand with tax optimization planning.
I do have another client where IL is not happy with the income moving off of their books, they want to resee proof that they already possess, just to be difficult, hoping that the client just writes a check.