Tax What If Doctor

With tax season in full swing and documents from broker/dealers and other investment companies coming out later and later, you can definitely smell the tax “angst” in the air.  The amount of pressure that tax offices and their clients seem to be under is palpable. Why is this all happening and what about this is important to you? It’s happening because, over the years, although the IRS has stood firm at mid-January to April 15th as the filing season for 1040 filers, on the other side of the equation are the vendors themselves that have to send documents to the IRS:  The banks, the mortgage companies, the investment companies, etc.  The companies have managed to lobby and get extensions of time[…]

Have you worked toward losing weight in the past because you want to look more attractive, or fit into an expensive wardrobe you already own? When you lose weight you often also lower your blood pressure and/or cholesterol as a bonus. It might not be the primary motivation, but the extra benefit is of course welcome! If you are a business owner, then we pose this question. Some time ago you had an idea. Over the years your turned that idea into a successful and profitable business. Have you properly protected what you worked so hard to build?  An unexpected turn of events could put your biggest asset at risk. Did you know that moving business earnings into a qualified[…]

When you start tax planning with a new client, the first thing people often ask is why the accountant or CPA they are using doesn’t think or act the way you do in discussing the hunt for possible tax savings. After all, the current CPA is smart, trustworthy, running a successful accounting business and well respected in the community. So, why are you telling them all these wonderful new tax savings ideas that their CPA has never mentioned? There are many explanations, but the simplest is how the accountants themselves view the job that they do. Often, accountants think that the profession of accounting in its simplest form is the job of telling the story of money that has already[…]

At this time of year many people who were getting a refund have already filed their tax return. It leaves the remaining majority of folks who, despite having withholdings, are still going to owe additional tax. We talk a great deal about tax planning and changing behaviors to achieve better outcomes in the future, but many are faced right now with a tax bill for last year. So, what can be done? Anything? The answer is YES! It’s actually simple and easy for most folks to substantially reduce the tax liability they are facing by opening a prior year IRA! It is one of the very few ways the IRS allows you to retroactively affect your taxes. What if you[…]

People often struggle with record keeping and are typically so busy that they are simply unaware of tools or services that have been developed that could greatly improve the recording of tax deductible expenses, mileage, etc.  Many topics we could cover here, but two that are universal. If you are in business, you have a phone and a car.  Cell phones are pretty typical for smaller companies. What we usually see is a personal cell phone bill of about $150-250 a month, and of course the business owner wants to deduct it all.  When you start asking questions however, it’s almost always a family plan with the spouse and kids on it, so 80% of the cost and use is[…]

We use the term “tax planning” often, but we are aware that many people are not sure what it really is. Some people think “That means off shore accounts and citizenship shell games ending with jail time.  No thank you!”.  That’s not tax planning; that’s tax evasion, and it’s not at all what we recommend.  Others think only the wealthy need a tax planner, and for regular folks it can mean paying a 30 year mortgage off 12 years early or having a college fund with enough in it to actually pay for college.   Tax planning is not just for the wealthy, though.  It can be a useful tool for anyone who is aware of the opportunities. Our tax[…]

People try, but “adulting” is hard!  Kids, pets, job, relatives, friends, bills, medical problems, car problems, work problems all in the last day, so when I have time I will start tax planning.  Same as….so when I have time I will start estate planning, it’s just so too far down on most peoples’ day to day list of things to do that all the other issues just cycle in some complex order that nobody understands and the last two items never seem to bubble up to the top…UNTIL THEY DO! If you are a business owner, thoughts of tax planning might bubble to the surface a couple times a year, perhaps March 15th and April 15th (or later if you[…]

People who are worried about the 10 year rule, requiring beneficiaries of inherited IRAs to withdraw the entire balance within 10 years, can double that time with a CRT beneficiary in front of inheritors.  What if you really have a big IRA and the 10 year rule just isn’t enough of a stretch to help your beneficiary stay out of the top tax bracket?  Or any other reason you care about reducing the negative tax impact from the 10-year rule? You could use other remaining tax rules to your benefit by setting up a charitable trust.  A charitable trust allows the retirement assets to continue growing tax-deferred, even once the assets are distributed from the retirement account into the CRT.[…]

As weather interrupts some parts of the country and business owners have to scramble and fill in the gaps of employees, supplies, deliveries and the like, it’s easy for them to worry about taxes later, after all, there’s “plenty of time.” That often comes back to bite them though, sometimes hard. If they run their business as a sole proprietorship then yes, they have until mid-April to file, and until mid-October if they file an extension.  However, the majority of small businesses under pay tax estimates, if the pay them at all, and the first filing date (mid-April) is when the taxes are due, even with an extension to file. The penalties and interest are based on what’s owed and[…]

A few weeks ago a major piece of legislation was signed into law and in our qualified opinion, seniors win. Young people however, who are being told they win as well, may actually lose, due to basic human nature. For our seniors, the rules around Required Minimum Distributions from IRAs, also known as “RMDs” were changed, moving the age at which they must begin from 72.5 to 73 years old. Tax rules that run on age changes and dates are just easier to follow for most. As people are living longer and many are working past age 65, it was time to adjust those rules, which just a few years ago had required distributions triggering at age 70.5. It is scheduled[…]

Sometimes “Tax Planning” can be easy: “Open an IRA and it reduces your taxable income.” Other times it can be quite complex: “Cost segregation” on a building means hiring an engineering firm and having a structure broken down into its many components on paper, with each value separately listed; the frame, wiring, heating systems, etc., and taking write-offs, generally much faster than simply taking a standard approach. These are both ways to lower federal or state taxes.   For the people who have made large amounts of money or have larger estates, the year to year tax bill is not as much of a concern as the “Death Tax Bill.” Planning for them can be simple or complex as well,[…]

We talk a lot about people not doing tax planning and not spending more time creating the tax outcomes they want. We urge people to understand that it’s within their own control and that tax outcomes can be legally and ethically manipulated.  We go on and on about the benefits.  BUT…we understand why it’s so rarely done! It is because almost nothing in people’s lives has more constant change than taxes, and keeping up with all the changes can be an overwhelming challenge.  What if every four years your banking rules changed, “Oh I’m sorry John, we no longer pay you interest, now you pay us interest to keep money here.”  Or “Now you have to send in your mortgage[…]

There are many ways a tax return can be done that are all OK with the IRS, but only one of those ways nets the largest refund!  People need to understand this across America, and we talk about tax planning constantly.  We blog, tweet, post, email and on and on, yet we as an industry are not even getting 10% of the public to take on tax planning!  The clients who do are often thrilled at the outcomes, and yet it’s just hard to get people to want to spend half the time that they spend planning their vacations on planning their own tax outcomes, even though larger refunds would pay for those vacations! Tax planning offices often don’t look like[…]

Many people have the intention of doing a better job of “tax planning” in order to start having more favorable outcomes, but busy lives and life interruptions can leave them little time.  If this is you, you’re not alone.  Time flies even in normal times, but with the current stressful environment, everyone is scrambling even more, so you look at the calendar and think, “I can go see my accountant or financial advisor, or I can get my shopping done”, and the next thing you know its Dec 18th and the end of the year is upon us. Most advanced tax planning requires communication about concepts, takes reams of paperwork and time to submit to custodians, so it would be[…]

Dear Santa, I feel like you put me on the naughty list ever year. When I file my tax return you impose taxes on me that I don’t want to pay. It feels like tons of coal are being unfairly put into my very little stockings. I try to be a good person all year, so I’m not sure why you are singling me out and treating me this way. Dear Suzie, You are not on the naughty list. In fact, you’re not on any list at all. You’re not being watched by me or my elves, unless you are doing things you ought not be doing. Every year I actually provide you with lots of presents, the following just[…]

Most business owners in any five year period can answer yes to at least one of these life event questions that would cause them to need to know what their company is worth. 1. Are you contemplating the sale of your business? 2. Are you working with or bringing in a partner? 3. Are you contemplating or currently going through divorce proceedings? 4. Are you potentially going to have to defend yourself or your company in court? 5. Are you looking for financing? There are other possible reasons of course, but the point is that there are many times a business owner finds himself or herself needing to obtain a proper business valuation for their company. Unfortunately, it’s often an[…]

Ask anyone if they “pay too much income tax” and the knee jerk reaction is almost always, “Yes!” and without much hesitation. Why do we call that a knee jerk reaction? Because if you then follow the question up with two more questions, “What did you pay in federal tax last year? And/or what bracket are you in?” they almost as quickly say, “I don’t remember, or I’m not sure.” Or they might guess at a bracket percentage, but usually not correctly. We’ve even had people profess the pain of paying too much in tax only to discover that not only did they get back all of their withholdings, but they were given tax credit refunds of money they did[…]

This is the time of year when people often start taking personal inventory of how fortunate they are and start considering charitable contributions as a way to “give back” a little. For some, it’s an automatic budget item in their day to day lives, but for others it’s a new activity. For many years the IRS has helped people give by allowing charitable contributions to be deducted on schedule A when they file their taxes. The tax deduction value of those gifts changed with the Trump tax code simplification, as many people no longer need to file a Schedule A due to the higher standard deduction. Many people are still ingrained in their old charitable giving habits and aren’t aware[…]