Tax Planning Update and Example

Tax Planning Update and Example

April 14, 2023

My IRS Enrolled Agent designation was officially approved on April 12. About 10 more days and I will be done with my Masters in Taxation. Why did I do this? Yes, we are preparing tax returns for clients in need of a tax preparer - and I will share that in the 15 tax returns we are doing this year, I have discovered several mistakes that have cost clients money - both in self-prepared returns using TurboTax, and CPA/EA prepared returns as well. Some deductions and credits are really specific to investments such as the Foreign Tax Credit which has a few different claiming options depending on the situation (and software doesn't really explain these options), as well as deductions for Investment Advisory fees - which while no longer federal tax deductible, are still deductible on California taxes. And on top of that - here is a great example of tax planning that I can do now without needing outside input. Here is a retired client with minimal expenses and income. Her tax return actually comes out with negative taxable income, but with a sizable IRA, that will no longer be the case come age 73 and required minimum distributions. Using my Right Capital planning software, we put together a Roth conversion strategy that causes her to pay SOME taxes now, but saves her HUGE money in the long-term. She ends up with roughly $700,000 more dollars by age 90 - with it ALL in tax-free accessible Roth IRA accounts. Being an EA, I can assess this strategy and make sure to consider tax ramifications, Medicare IRMAA implications, SS taxation and anything else. Want to look at this strategy for yourself? Let me know.