Tax planning / $2,400 to $4,800
Tax planning that starts in January.
Your CPA reports what happened. By April it is history. We work the eleven months before that, when the numbers can still move.
Planning versus preparation
Two jobs. Most people only hire one.
Tax preparation is filling in the form with what already happened. It matters and we are not replacing your CPA. Tax planning is deciding, during the year, what will happen: which account to draw from, how much to convert to Roth, when to sell a lot, whether to give the appreciated shares instead of cash, whether this is a year to bunch two years of deductions into one.
The savings are not clever. They come from doing ordinary things in the right year. A household that retires at 62 and takes nothing from the IRA until 73 often pays more tax over its life than one that converts a slice every year in between. Nobody is doing anything wrong in the first case. Nobody is planning, either.
Tax planning is included in retirement planning and equity compensation engagements. It is offered on its own for households that have their own plan and need the tax layer.
The calendar
What happens when.
- JanuarySet the year
Last year's return in hand, this year's income estimated. We set the withholding, the estimated payments and the conversion budget. Retirement contributions get front loaded if cash allows.
- AprilReconcile
The return is filed. We compare it with the projection, find what moved, and feed the difference into the plan. Any refund larger than a few thousand dollars means the withholding was wrong, and we fix it.
- June to SeptemberAct
Roth conversions happen in slices, not one lump in December. Charitable gifts of appreciated shares get set up. Lots with losses get harvested when markets give them to us, not on a schedule.
- OctoberProject
The full year projection with ten months of real numbers. This is the meeting where the last conversion slice gets sized, the bunching decision gets made, and the year end sell list gets written.
- DecemberFinish
Required distributions out, gifts made, conversions done by the 31st, the sell list executed. A one page summary goes to your CPA so the return is a formality.
The moves
Five ordinary things, done in the right year.
- Roth conversions. Fill the lower brackets in low income years so required distributions and the survivor's single filer brackets hurt less later.
- Bunching. Two or three years of charitable giving into a donor advised fund in one year, itemize that year, take the standard deduction the others.
- Harvesting. Sell lots at a loss to offset gains, buy a similar fund the same day, stay invested. Done when the market offers it.
- Asset location. Bonds in the IRA, stock index funds in the taxable account, the highest growth in the Roth. Same portfolio, less tax, forever.
- Gifting shares, not cash. Give the appreciated lot. The charity gets the full value, you skip the gain, and the cash you would have given buys the fund back at a new basis.
None of this requires a view on the market. All of it requires someone to be paying attention in July. For how this fits inside the full plan, see pricing.
- Fee
- $2,400 to $4,800 a year standalone, flat. Included at no extra charge in retirement and equity engagements.
- Typical client
- Households with a brokerage account, an IRA, charitable giving and at least one year of income that looks different from the others.
- What you receive
- A January plan, an October projection, a December summary for your CPA, and the conversions, gifts and harvests executed on the calendar.
- Not included
- Preparing or filing the return. We work with your CPA, and will refer one if you need it.