TAX PLANNING CASE STUDY

Maximizing Tax Returns As An Integral Part Of  Comprehensive Financial Planning

When engaging with new clients we have found that they are commonly missing substantial tax saving opportunities because their previous the tax preparer’s approach can be too simple.

Clearstead is able to review a client’s portfolio: drilling down and picking apart every aspect of a client’s finances to find ways to leverage and build income. As part of our process, Clearstead’s tax specialists look at prior tax returns to determine whether a more comprehensive planning and compliance plan could benefit a client. By untangling prior filings, Clearstead could identify undetected savings.

IN SOME CASES WE HAVE OPPORTUNITIES TO EXCLUDE INCOME FROM TAXES IMPOSED BY THE AFFORDABLE CARE ACT.  THIS CAN BE AN AREA WHERE PRIVATE EQUITY CLIENTS FREQUENTLY PAY SIGNIFICANT TAXES ON INCOME GENERATED FROM THEIR FIRMS.

By implementing filing strategies that minimize taxes, our clients can potentially keep more assets in their accounts and reduce the amount investments they have to sell to pay taxes. It’s an example of how our firm’s comprehensive, service-focused approach can benefit clients and captures opportunities that can go undetected when different financial planning functions – especially taxes – are outsourced.

Here’s a look at other hidden opportunities and ways our team’s efforts can benefit our clients: 

Amended Tax Returns

Other hidden opportunities might include the small business stock capital gains exclusion. In these situations, a client might invest in a small C corporation, hold it for a period of time, and then sell the stock. The IRS code allows for exclusions of 50 to 100 percent of that gain depending on when it was bought and when it was sold. This type of analysis could create savings worth thousands of dollars by amending tax returns.

Income Deductions

Another frequently overlooked opportunity is the Ohio Business Income Deduction. In some situations, Clearstead has identified wage income that qualifies for the deduction but was not excluded in tax returns by the client’s previous accountant.

New Tax Code Deductions

With changes to the tax code enacted in December 2017, the Clearstead team is busy analyzing optimal positioning for clients, such as the 20 percent deduction for pass-through income. Already, Clearstead has identified opportunities under the increased estate tax exclusion to bring assets back into the estate and potentially give clients a stepped-up basis in assets and reduce unrealized capital gains. This strategy could save thousands of dollars in unnecessary tax payments.

We are also looking at itemized deductions that will be lost under the new tax code and creating strategies to help offset those losses.

Tax planning

While all CPAs will prepare quarterly tax estimates for clients, Clearstead prides itself on diving deeper into details. Throughout the year, we are analyzing data, talking to our clients, and working on ways to minimize tax payments. It is a continuous process, and the tax return is a byproduct of a yearlong analysis. But the only way to truly maximize these returns is to have a full understanding of the client’s financial portfolio, which is where Clearstead – and its clients – have realized their greatest success.

Find Your Clarity

We bring our clients objective financial leadership through our fee-only advisory model, which enables us to remain objective. We do not offer proprietary products and take no commissions from product sales: our only source of revenue is fees we receive for financial advice. True to our founding principles, we do the hard work: the day-to-day investment management integrated with organizational priorities and family aspirations.

Clearstead is an institutional and private client advisory firm that is relentless in providing solutions so our clients can exceed their aspirations and build stronger legacies for their families, their communities, and themselves.

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