This is an important time of year for gatherings, resolutions, and the most important thing in life: tax planning.
• Covered CA open enrollment and health insurance in general (get it NOW)
• Tax planning is something done before the year-end
• Some cards that might be on the table: Accelerated state tax payments, retirement accounts
• Year-end purchases of expensive Apple products, charitable giving and much more
• Considering a new business entity
• Accounting Play free resources for clients, friends, educators
• G.CPA Developments
• Surf report (no skipping ahead)
Please do not implement strategies without checking with me… as really… every tax situation and personality is different. This is educational and informational, and for sure, not tax advice.
Covered CA enrollment period is… EXPIRING DEC 15th. Getting insurance through the exchange was the same price for me at least, as it was to go directly from the health insurance company. Going through Covered CA allows for potentially valuable tax credits or subsidized premiums for some. Most of my readers are unlikely to receive the credit, but at times, income can dip due to new business endeavors, so might as well use the exchange generally. There are significant penalties for being uninsured. No excuses. Get health insurance and get me your “1095-C” issued by your health insurance provider.
Tax Planning Before Year-End
Old-school CPA tax planning was mostly isolated to some basic after-the-fact offerings – like – “You want a Roth or SEP IRA with that?” In our aim to summit the Gillingham Hierarchy of Client Needs and reach tax actualization, we must go further than this. Here are some “cards” you might have to play, aka potential planning strategies that can be employed before and after year-end depending on the strategy.
-Roth / Regular / SEP IRA contributions
-Fishing for legitimate deductions
-Timing of state tax payments
-Establishment of Solo-401K plans / deferred benefit plans
-Full utilization of workplace 401Ks and similar
-Contribution to after tax IRAs then converting to a Roth – aka a “back-door” Roth IRA for very specific high income earners
-Payroll runs, bonuses, and contractor payments
-Fixed asset purchases that may be expensed in the current tax year (expensive Apple products)
-Establishment of exclusive use home office (no fun allowed in the home office)
-Strategic stock sales for gains or losses
-Stock option exercise
-Strategic sales of other rentals / business property to create large losses or accelerate income
-Understanding tax liability and cash flow / potential capital needs
-Accelerating income strategically in loss years due to business, disaster, or other dispositions
-Planning for significant life changes: new job, family, college, business, etc…
-Establishing tax positions around credits such as energy, research and development, domestic manufacturing production
-Establishing residency in another state
Generally poor (terrible) tax planning ideas
-Having a lot of kids as quickly as possible
-Getting married when you like the tax deduction more than your partner
-Being a tax protester
-Pretending like you are not a CA resident or doing business in CA, when you are
-Seeking healthcare when the person could have been a domestic partner, anyway
But “Dear Mr. Gillingham CPA – none of this applies to me!” Well than, great, consider tax planning complete. The idea behind planning is generally to slow revenue, accelerate deductions that provide significant benefit, and create consistent actions – such as retirement contributions, which generally are much appreciated in the future. There is not an outsized win every year, but we do our best anyway. In taxes and life, nothing is certain, but we do our best.
Considering a new business entity
Doing business in CA comes with some serious sunshine tax. Figure at least $800 a year for an entity + local business registration, $1,000 is just the starting place. This is old news for my LLC and corporate clients, but many jump into the Legal Zoom or equivalent without awareness of the costs or benefits of XYZ entity. There are many variables that are technical and practical, so it is important to consider both. I interviewed the local and acclaimed Bend Law Group this this very subject, during a podcast, HERE.
Accounting Play Resources
The more you know, the more time and monetary budget we have for planning. I invite you to a free membership on AccountingPlay.com. Just contact me directly.
Also please check out my latest and greatest Accounting Play iOS app: Tax Fight!
Thank you for your continued support and referrals. We are growing strong and welcome new business owners and “complex” individuals into the fold.
Surf Report – Domestic & International
This time of year Ocean Beach SF comes alive. Please see for yourself (pictures below, our very own, Sloat Avenue, SF, unnamed CPA)
Cimaja, Indonesia also offered up some racy gems. I am particularly thankful for all of my supportive clients and giving ocean.
All The Very Best,
John and Gillingham