Tax Planning - My firm is strictly an
accounting and tax practice. Clients benefit by choosing from the most current
tax planning strategies available. Many accounting practices attempt to be a "one
stop shop" by representing themselves as investment advisors, stock brokers and
insurance agents. The problem with this approach is that it leads to a "jack of
all trades and master of none" mentality. The following are examples of tax planning and audit representation the firm has provided:
Client Communication - Although I have associates that assist me with
accounting and tax return preparation, my clients always deal with me on all
financial and tax matters. I do not push my clients off to an associate whom may
not be familiar with the client goals. In addition, all telephone messages are
returned within 24 hours. Your issues are important to me and I am always
available to discuss financial and tax matters.
- The "Tech Boom Bust" in the stock market during 2000 and 2001 provided
exceptional tax planning opportunities. For this client the firm completed a 2001 "Day Trader Election." The election was filed during the 2000 calendar year.
The Day Trader election allowed 2001 stock losses to be deducted as ordinary
losses, lowering taxable income and generating a 2001 individual net operating
loss. Individual Net Operating Losses may be applied on taxpayer's amended
return for two years prior. The 2001 individual net operating loss was then
deducted on the client's 1999 Amended individual 1040 tax return and the
resulting refund was in excess of $185,000.
[See 1999 Amended Day Trader Election ]
- The recent Madoff scandal provided openings for tax planning. The Internal
Revenue Service began to allow "Ponzi" type losses to be deducted as ordinary
losses against income. In the past these losses were considered Capital Losses
and limited to a tax deduction of $3,000 per year. For this client the firm filed a
2010 1040 deducting an Investment Theft Loss of $303,493 and related legal fees
of $104,155. These loss deductions created an individual net operating loss of $296,891 that was deducted on a 2008 amended individual tax return. The 2008 amended return yielded a refund in excess of $32,000.
[See 2010 1040 Ponzi Deductions ]
[See 2008 Amended 1040 for Ponzi Loss ]
- Corporate downsizing and shifts in the economy have given rise to many small
business start ups. Business and individual tax planning are often interdependent.
In this instance, client's 2009 S Corporation Loss of $78,402 was reported on
client's 2009 individual tax retum(as is required by IRS regulations). This
generated an individual net operating loss of the same amount, $78,402. When the loss was deducted on client's 2007 amended individual tax return, a refund was generated in excess of $27,000.
[See 2009 S-Corp Loss ]
[See 2007 Amended 1040 for S-Corp Loss ]
- Tracking individual net operating losses often provides tangible tax benefits. For
this client's Amended 2008 individual 1040, a refund in excess of $10,000 was
generated from applying a 2010 Net Loss to the 2008 tax year. Client's 2008 1040 had been initially filed deducting a 2007 Loss Carryover. Net operating losses may be carried forward and carried back to the same tax year.
[See 2008 Amended 1040 for Loss Carry Back & Carry Forward ]
- Limited Liability Companies are one of the most effective mechanisms for
business tax reduction. During 2009 I accepted a new LLC client and reviewed
their 2008 LLC tax return for potential amendment/refunds. The client's were
provided with and filed an amended 2008 LLC tax return. When the 2008 amended LLC results were reported on their individual tax returns, refunds were generated in excess of $6,000 and $5,500.
[See 2008 Amended 1040 for LLC 1 of 2 ]
[See 2008 Amended 1040 for LLC 2 of 2 ]
- Mining prior year's returns for refunds is not limited to business returns. A new
client's 2010 individual 1040 return previously filed was reviewed and an amended return prepared to correct rental property depreciation. The correction generated a combined Federal and CA refund in excess of $4,800.
[See 2010 Amended 1040 for Rental Depreciation ]
- Internal Revenue Penalties can be severe. A former client returned to me with
two years of Non Profit Organization tax returns filed late by another preparer. 2008-2009 IRS penalty assessment was $20,000 ($10,000 for each year). After filing an abatement request, penalties were reduced to zero.
[See IRS Penalty Notice ]
[See IRS Penalty Abatement Notices ]
- The attachment of a retirement plan to a Corporation or Limited Liability
Company is a great means for reducing taxes and saving for retirement. A
Defined Benefit Plan proves valuable when a business has been generating
income for a number of years. For 2011, client contributed $160,200 to his
Defined Benefit Retirement Plan while receiving only $50,000 in Salary. This is
possible because Defined Benefit Plans use a Salary average for the past three
years for the current year contribution calculation. If the average salary is high
enough, the current year Salary is not considered for the contribution calculation.
The $160,200 contribution generated an S Corporation loss of $114,274. When
the S Corporation loss was reported on client's individual tax return, client's combined Federal and California refund was in excess of $30,000. Client applied the $30,000 refund to fund his current year pension plan (Business and Individual returns had been extended).
[See 2011 S Corp with Defined Benefit Plan ]
[See 2011 1040 with Defined Benefit Plan ]
- Effective tax planning and preparation leads to convincing Internal Revenue
Service Audit representation. A client was executor and beneficiary of an estate.
The estate owned rental properties and when the Estate's final year tax return was
completed, the executor/ beneficiary received an estate tax loss of $95,000
deductible on his individual tax return. The Internal Revenue Service selected the
executor/beneficiary's individual tax return for audit. The IRS attempted to
disallow almost $66,000 of estate deductions producing an additional tax assessment of approximately $14,000. After meeting with IRS representative and submitting written support of our position, assessment was reduced to $593.
[See Initial Audit Tax Assessment ]
[See Audit Response Letter ]
[See IRS Audit Final Determination ]
- During January 2012 I agreed to represent a taxpayer for an Internal Revenue
Service audit of a 2006 Individual Tax Return Form 1040. I had not prepared
taxpayer's 2006 return. Initially the IRS disallowed Sole Proprietorship business
expenses of $17,681 and assessed additional tax due of $3,157. After
reconstructing client's records and reviewing with IRS representative, final audit
determination was no additional tax due.
[See Audit Tax Assessment ]
[See Audit Final Determination ]
Client Networking - Since the success of your business is directly linked
to the success of my practice, I market your product or service to my current
clients. Many of clients have found opportunities that would not have presented
themselves except for this type of arrangement.
Annual Quote - The firm provides an annual quote based on work accepted.
I have found that this helps clients budgeting and cash flow projections. The
annual quote includes tax and financial consultation related to services
Protection of Client Data - My firm contracts with a shredding service to
destroy all client documents containing sensitive information such as social
security numbers and bank accounts. Identity theft is always a threat and I
protect my client's security.