Taxes

Taxes are an integral part of any financial plan. As such, tax preparation, planning and representation are services we offer for individuals, businesses, trusts and corporations.

In tax preparation, we endeavor to find every possible deduction and save our clients on their tax bill. We will always show you how to pay the least amount in taxes as is legally possible. Tax avoidance is a perfectly legal activity, and in fact a responsibility. It is tax evasion that is illegal. As the old joke goes, what’s the difference between tax avoidance and tax evasion? Five to seven years!

In tax planning, we take an integrated and logical approach. While, everyone always wants to minimize their tax bill, sometimes it may be better to pay a little bit more tax now in order to save much more tax later. For instance, if you have a year where you earn very little or have alot of deductions, it may make sense to withdraw some IRA or 401K moneys (or roll some into a Roth IRA) and pay the tax at a lower rate. If you can pay tax on the money now at 10-15%, why not take advantage of that rate as there’s a good chance that later in life you’ll pay a higher rate. Most people are unaware that up to 85% of their Social Security benefits can be subject to income tax. This can change a 15% tax bracket into a 28% marginal rate. Through proper planning, the taxation of your Social Security

benefits can be reduced or eliminated. Sometimes by choosing to pay more tax in one year, we can save much more in others.

What really matters is maximizing your after-tax spendable income for both now and in the future. The average American spends 40% of their total lifetime income on taxes and saves just 3% of their lifetime income.  What if you could save just 10% of the taxes paid (10% of 40% = 4%).  That could more than double your savings.  While many planners focus on returns on investments, doubling the amount saved to begin with can have a much larger overall impact on your financial life.

The possibility that tax rates may increase is a risk we are all facing. It is wise to incorporate proper planning to address this risk. If you have large pools of qualified money (eg. pretax money in IRAs, SEP IRAs, 401(k)s and 403(b)s, etc.) you are at risk that when the time comes to pay taxes on that money tax rates could be considerably higher. Think about it in terms of a need to diversify against tax risk, just as you need to diversify against market risk.  In markets this is accomplished by owning  a variety of different shares and/or funds. For tax risk, diversification amounts to having a proportion of your savings in after-tax accounts that are not at risk of taxation. Such decisions are complex and very individualized. They depend on a one’s current earnings, and future earnings and tax rate expectations, family structure, expected uses of funds, deductions, etc.

I would be happy to discuss your specific case with you to assess your optimal strategies may be.

We work with a variety of EAs and CPAs on an as-needed basis, optimizing your costs while providing all the expertise necessary for your specific case. You’ll never pay too much, and you’ll always have more skill and experience behind you as needed. We have thousands of tax returns under our belts.