Thread by @roncaruthers

1. I just saved a new client over $100,000 on their 2021 tax bill.

Want to see how we did it?

Of COURSE you do!

Read along. This IS for a business owner, but it's worth paying attention even if you don't have a business.

2. OK, first: a disclaimer: I gave him 15 suggestions. We are NOT going to implement all 15 of them.....but if we pick the top 5, he'll save at LEAST 100lk.

Disclaimer #2: this dude made a TON of money in 2021, and it will likely NOT be repeated.

Don't get me wrong:

3. He makes great money....it's just this year was exceptional.

I can't say why, cause it will give his industry away, but THIS is how you handle a one year earned income windfall. (it would be different if it was an inheritance.)

OK, here are the suggestions with my comments:

4. I reccommended he get set up a qualified retirement plan.

You know...like a 401k or SEP plan.

Yes, I normally rail against them because they DO suck....but....when you're faced with paying 55% in taxes on a LOT of money, you have to consider all your options.

5. Just because he's doing this, doesn't mean you should.

But, if he puts $58,000 into a SEP, that alone will save him $30,000.

I'm also considering adding a cash balance plan on top of that to increase what he can contribute.

6 I don't do a lot of these so I'm having to research this one.

I'll keep you posted.

7. I'm having him buy any and all office stuff that he needs before December 31st AND putting it in service to save on taxes this year via Section 179.

Again, the key words are 'stuff he NEEDS', so we're not buying stuff just to buy stuff.

8. He's also getting a new car which we'll put into service for a deduction as well.

On a side note, another client just got a sweet GLS 450 Mercedes to take the full depreciation this year since it weighs over 6,500.

More on this in another thread.

9. His kids are young, but I'm suggesting that if he needs models for advertising or website, he hire his kids as the models, IF he's comfortable with that.

He can pay them normal rates, deduct them from his business, then take the money and put it into a Roth IRA for them.

10. It will grow there for them tax-free bascially forever.

Also, he has family overseas, so if any of them are helping, he can pay them, take a deduction and not even file a 1099.

11. This one is GOLDEN: you can legally prepay up to 12 months of business expenses on things like rent, business and malpractice insurance premiums , care and equipment leases, and stuff like that.

So, watch this:

12. Let's say his rent is $5,000 a month.

He can write a check to his landlord for $60,000 for ALL of 2022 on the 30th of December and put it in the mail (I'd track it to prove it was a 2021 deduction)

The landlord won't get it until after the 1st, so it's 2022 income.

13. That's another $33,000 in savings this year.

If you're going to do this, be sure to make sure it's OK with your landlord, btw.

Otherwise, you're going to freak them out. Oh, and I'd probably ask for a discount first to save even more.

14. I think he's already taking the Employee Retention Credit, but we're checking to make sure.

AND, we're suggesting he stop billing his clients for 2021, as long as he knows they're good for the money.

15. This strategy is overused where income is more static, because all you end up doing is saving money the first year, then having to continue to push income the following year, and it ends up being the same after the first year.

16. But again, in a case where there is one huge year, this makes a lot of sense.

We're also considering setting up a 105B medical plan, but it depends on his employees.

17. This allows you to contribute for unreimbursed medical expenses, and it can even include things like personal hot tubs and mattresses, but you have to offer it to all of your employees.

If you're unfamiliar with it, I did a thread on it about a year ago that is still valid.

18. We're also looking into investing into an Opportunity Zone, which is a new thing from the Tax Cuts and Jobs Act of 2018.

I'll put more information up on this in the next few days.

AND, we're looking to see if he can qualify for any Research and Development Tax Credits

19. I don't believe his previous tax professional was taking a home office deduction, so we're setting up one of those AND making sure he's deducting his mileage to and from his business each day.

20. He took a couple of trips, so we're making sure those are work related so we can deduct those.

&, of course, since he's way over the Roth IRA limits, we'll suggest a 77.02 plan aka a properly structured cash value life insurance plan for indexed growth, and the tax benefits

21. Finally, and this one is aggressive….like WAY aggressive…we are discussing a Conservation Easement.

22. The IRS does NOT like people using these, because they can reduce their W2 income by up to 50% in a year,

BUT there are several reputable sponsors of these plans that may make it worth considering.

Everything else I’ve mentioned is common practice and accepted.

23. This one they like to fight, but for my clients that can handle the risk, they’ve worked out very well.

And there you have it.

I'll be posting more tax tips over the next few days, but this gives you an idea of the blueprint I follow for a client in this situation.

24. I suppose I should a disclaimer that this is NOT personal tax advice, and you should not attempt this at home, and your mileage may vary.

BUT, here is a blueprint to six figures of tax savings.

Hope you learned something.

/end