4 tax-planning strategies CFPs love

I love my CPA friends. But sometimes, there's a major disconnect in how we deliver advice.

Some of our recommendations feel so obvious. But might look 𝐰𝐫𝐨𝐧𝐠 to the tax pro.

To help bridge this gap, here are 4 strategies that Financial Planners love to recommend, that tax pros may be hesitant about:

▪️ 𝐒𝐨𝐥𝐨 (𝐈𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥) 𝟒𝟎𝟏(𝐤), 𝐢𝐧𝐬𝐭𝐞𝐚𝐝 𝐨𝐟 𝐒𝐄𝐏 𝐈𝐑𝐀

For 1099 workers / solo-preneurs, especially in the early days, you can generally save considerably more by using a solo 401k, rather than a SEP IRA.

Both can be set up just as easily, and the SECURE Act declared you can now open & fund a solo 401k up through 4/15.

▪️𝟓𝟐𝟗 𝐬𝐮𝐩𝐞𝐫-𝐟𝐮𝐧𝐝𝐢𝐧𝐠 (𝟓-𝐲𝐫 𝐟𝐫𝐨𝐧𝐭-𝐥𝐨𝐚𝐝)

Instead of the $19,000 annual gift amount (i.e. no gift tax owed), if the gift is made 𝘥𝘪𝘳𝘦𝘤𝘵𝘭𝘺 𝘵𝘰 𝘢 529 𝘢𝘤𝘤𝘰𝘶𝘯𝘵, each individual can gift 5-years' worth of annual gifts into a 529 as a gift - no gift tax will be owed.

You must file a Gift Tax Return (form 709), however. On the form, there is a specific ✅ checkbox for this 5-year gift strategy.

▪️ 𝐂𝐡𝐨𝐨𝐬𝐢𝐧𝐠 𝐭𝐨 𝐩𝐚𝐲 𝐭𝐚𝐱 𝐭𝐨𝐝𝐚𝐲, 𝐢𝐧𝐬𝐭𝐞𝐚𝐝 𝐨𝐟 𝐝𝐞𝐟𝐞𝐫𝐫𝐢𝐧𝐠/𝐬𝐚𝐯𝐢𝐧𝐠 𝐭𝐡𝐞 𝐦𝐚𝐱

This one can break the brain a bit.

In a tax vacuum, of course you'd want to pay the least amount in taxes.

But depending on the big picture, there are plenty of reasons you might forego savings today to win the great battle.

Sometimes you need the cash. And sometimes you simply want to pay taxes to take advantage of current tax brackets.

▪️𝐁𝐚𝐜𝐤𝐝𝐨𝐨𝐫 𝐑𝐨𝐭𝐡 𝐈𝐑𝐀 𝐜𝐨𝐧𝐭𝐫𝐢𝐛𝐮𝐭𝐢𝐨𝐧𝐬

Form 8606 can be tricky, and then the (non-taxable) 'conversion' needs to be recorded accurately.

It requires a $0 IRA balance, which a tax preparer generally doesn't see immediately.

🙏 🤝 𝐏𝐥𝐚𝐧𝐧𝐢𝐧𝐠 + 𝐓𝐚𝐱 = 𝐰𝐨𝐫𝐥𝐝 𝐜𝐥𝐚𝐬𝐬 𝐚𝐝𝐯𝐢𝐜𝐞

It's not about my advice versus yours. It's about deciding on the best route as a team, so the clients receive the best, custom results.

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