Get Ready for Tax Season 2024! Filing Begins January 29th

What Is a Tax Planning Strategy?

Tax Advisory and Planning - SG INC CPA

Tax Planning Strategy

A tax planning strategy is an action that a business or an individual can take to lower their tax burden. There are many different types of tax strategies. Some take advantage of tax deductions to lower taxable income, some use tax credits to reduce tax liability, and others (such as entity and compensation optimization) change one of the many factors that affect

Tax Planning Is Proactive, Not Reactive DIFFERENCE BETWEEN TAX PLANNING AND TAX FILING?

“Your gateway for a transition from past (Reactive) to future (Proactive) Tax Planning with a Forward looking approach”

Tax Filing

(After Year End)
  • One-time a year meeting to file tax returns based on events that have already happened and numbers already incurred
  • Annual check-in with no ongoing consultation
  • A process of preparing, calculating, and filing income tax returns on behalf of individuals and businesses. And while it’s necessary, it’s ultimately considered an expense
  • Focused on tax forms submission to IRS

Tax Planning

(Before Year End)
  • A year-round service helping you make the smartest tax decisions when they need it most — before the decisions are made, and long before the year is over
  • An ongoing advisory relationship to add value
  • A process of looking at a person’s life, business, and regulatory requirements to legally reduce taxes using multiple strategies and entity structures that often result in significant savings - an investment
  • Implementation of tax planning strategies across the categories to help you make smarter tax decisions before filing tax return forms for compliance.

Tax Filing

(After Year End)

Tax Planning

(Before Year End)
One-time a year meeting to file tax returns based on events that have already happened and numbers already incurred A year-round service helping you make the smartest tax decisions when they need it most — before the decisions are made, and long before the year is over
Annual check-in with no ongoing consultation An ongoing advisory relationship to add value
A process of preparing, calculating, and filing income tax returns on behalf of individuals and businesses. And while it’s necessary, it’s ultimately considered an expense A process of looking at a person’s life, business, and regulatory requirements to legally reduce taxes using multiple strategies and entity structures that often result in significant savings - an investment
Focused on tax forms submission to IRS Implementation of tax planning strategies across the categories to help you make smarter tax decisions before filing tax return forms for compliance.

Tax Filing

(After Year End)
One-time a year meeting to file tax returns based on events that have already happened and numbers already incurred
Annual check-in with no ongoing consultation
A process of preparing, calculating, and filing income tax returns on behalf of individuals and businesses. And while it’s necessary, it’s ultimately considered an expense
Focused on tax forms submission to IRS

Tax Planning

(Before Year End)
A year-round service helping you make the smartest tax decisions when they need it most — before the decisions are made, and long before the year is over
An ongoing advisory relationship to add value
A process of looking at a person’s life, business, and regulatory requirements to legally reduce taxes using multiple strategies and entity structures that often result in significant savings - an investment
Implementation of tax planning strategies across the categories to help you make smarter tax decisions before filing tax return forms for compliance.

Why Tax Planning?

  • Get a full (holistic) view of a your Tax/Wealth Scenario, Not just one tax form/document at a time
  • Stop overpayment of taxes
  • Invest tax savings to grow your assets
  • Increase your net income and wealth
  • Increase your personal net worth

Our Tax Planning Strategies

  • Compensation optimization
  • Captive insurance (risk mitigation)
  • Section 1244 stock
  • Cash balance plan (self-directed real estate )
  • Cost segregation
  • Deferred compensation plans
  • Executive bonus plan (sec 162)
  • Income shifting strategies
  • Active vs passive/portfolio
  • Family office management co
  • Entity election
  • Qualified small business stock (qsbs) – section 1202 stock
  • Charitable remainder trust (crt)
  • Charitable lead trust (clt)
  • Private family foundation as llp
  • Donor advised fund
  • Oil & gas co investments
  • Commodities investing
  • Qualified opportunity zones (qoz)
  • Estate planning
  • Asset protection
Then each strategy details (content) can be taken from the following slides

Cash Balance Plan “Save taxes, invest and grow assets”

Defined benefit plan with following benefits
  • Employer control fund assets
  • Self-directed investment options
  • You define your own benefits
  • 3-year vesting schedule
  • No max limit
  • As a defined benefit plan, they typically qualify for federal insurance under the pension benefit guaranty corporation (pbgc).

Cost Segregation “Powerful strategy for real estate owners”

Take back your money now, not over decades 
  • Pay less upfront income tax
  • Reduce tax liability
  • Increase cash flow early in the ownership of the real estate
  • Invest the savings in your next real estate project 
  • Get better value of money today (real value in terms of inflation)

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SG Inc CPA understands the need for taxation services for small businesses and startups, so for them, we offer first-rate but cost-effective services

Private Family Foundation Set up a family foundation & receive a charitable deduction

Tax deductions 50% of the taxpayers adjust gross income
  • Tax deductible 
  • Donations may be cash or property
  • The foundation itself must meet rules and requirements based on the type of private foundation it is

Deferred Compensation Plan “Save taxes, invest and grow assets”

Options for highly compensated individuals to defer receipt of some compensation until a later time
  • A non-qualified deferred Compensation (NQDC) plan
  • Offer advantages when it comes to flexibility in timing and amounts of contributions

Qualified Opportunity Zone "Defer or eliminate tax prior gains by investing in certain properties."

Allows investors to invest unrealized capital gains into the economic development of undercapitalized communities and receive tax benefits for doing so
  • Investors can potentially reduce or eliminate tax liability on unrealized capital gains

Considerations 

  • There are a limited number of investment choices
  • Capital will be tied up for a significant period

Income Shifting Strategies “From higher to lower tax bracket”

Take advantage of tax bracket structure
  • Alternative means of withdrawing income
  • Shifting of income to activities with specially treated income & deductions
  • How to convert passive losses into assets
  • Retaining post-corporate-tax earnings into a reasonable amount

Get Quote

SG Inc CPA understands the need for taxation services for small businesses and startups, so for them, we offer first-rate but cost-effective services

Family Office Management Company "Hire your relatives to provide wealth management services to existing family businesses."

Keeping wealth management expenditures within the family
  • Can hire family members, keeping wealth management expenses in the family
  • May qualify to deduct some investment management expenses
  • Additional wealth planning benefits including shifting wealth to children
  • Can benefit from additional tax savings from other tax strategies 

Entity Election “Which structure is best from tax perspective?"

Take advantage of tax bracket structure

  • Are you being taxed at 40%?
  • Do you know you can be taxed at 21%?
  • Forming right structure can result in tax savings

Augusta Rule "Rent out your home to your business for up to 14 days tax-free."

Increase tax deductible Business expenses + Increases your personal income without any additional tax
  • Business owners can rent either their primary residence or a vacation home located in the united states to their business, for up to 14 days each year, without including income from the rental in the owner’s taxable income.

Oil & Gas Co. Investment “Invest in oil and gas companies to take advantage of multiple tax benefits."

Working interest in Oil and gas is not a passive activity, so it can offset active income
Loss of investment is deductible 
  • Taxpayers invest directly in private oil and gas drilling operations as opposed to investing in stocks. This direct involvement means the investor assumes a direct liability for the costs of drilling, exploration and production associated with oil or gas wells. Generally, the investor will be a general partner  in the organization.

Qualified Small Business Stock (QSBS - Section 1202) "Tax incentive to drive the investment and founding of small businesses."

Imagine owning stock in a company where the price appreciates greatly, you sell it, and pay no tax on your profit
  • Attract investors to raise capital reward employees
  • Exclusion of up to 100 percent of capital gain taxes realized on the sale of a small business
  • Option to role over and defer taxable gains by reinvesting in other QSB companies
  • Ability to “Multiply” the exclusion through gifts, transfers at death, and careful pre-issuance planning 

Section 1244 Stock “Deducted as ordinary losses instead of as capital losses."

Up to 100,000 Lose deductible as ordinary loss
  • Offset any other that you have
  • If you’re in the 37% tax bracket, that 1244 loss may effectively save you 37% times the amount of the loss

Accountable Plan "Tax free reimbursement for business expense."

Allow employees, including owners-employees, to be reimbursed for expenses paid out of pocket 
  • The expenses become deductions to the business
  • The employee or owner-employee can be reimbursed, creating non-taxable cash flow to them
  • Reduced taxable income and self-employment tax  for the business owner
  • Reimbursements excluded from employees’ taxable income (w2)