Mid-Year Tax Check Up

Posted on by Moskowitz LLP Posted in Tax Planning & Compliance

Now is the time for a Mid-Year Tax Check Up and Tax Plan

Throughout the pandemic, Moskowitz LLP has had the opportunity to exhibit their skill-set in a multitude of ways this past year: guiding clients through the Paycheck Protection Program and Employee Retention Credits, drafting business succession plans, executing estate plans, tax return preparation, and simply responding to tax and financial inquiries.

Because so many businesses and individuals find themselves in uncharted territory, we wish to remind you that an unexpected tax burden or failure to plan for tax, can be avoided if appropriate tax planning is conducted. It is a cost and time effective way to obtain peace of mind as to your financial wealth-health.

Why Consult Moskowitz?

Moskowitz LLP Tax Planning coordinates retirement, insurance, investments, education funding, asset protection, estate and tax planning. Each affects the other and mitigates implications. Because we prepare the tax returns, and may be already offering business forecasting services, Moskowitz LLP is the one that has the information and how it interrelates to provide comprehensive financial positioning and strategic planning. Our tax attorneys execute the strategy for resulting in a seamless optimization of your tax and wealth goals. Above all else, our tax check up and tax plans are time tested, cost effective, and practical for long term success.

Moskowitz LLP, a tax law firm, is in a unique position as tax attorneys and tax professionals who provide advisory services related to tax planning and wealth. We urge you to be proactive as potential significant changes to the tax code are looming.

What to Think About Now:

There is little question the tides are moving towards a higher tax environment. Instead of feeling helpless, here is a quick look at what might be on the horizon and some thoughts on how to be prepared.

    • Self-employment tax risk. Social Security and Medicare fund collections took a hit during the pandemic. This is because of high unemployment and new federal benefits allowing employers to receive a credit on these taxes to help continue paying employees to take leave due to COVID-19. Over the next few years, there will be tremendous pressure to add funds back into these programs. This might be done by increasing the taxability of benefits or dramatically increasing the income subject to Social Security taxes. Potential action: Continue to work on a retirement plan that is not as dependent on Social Security benefits. If you are a small business owner, and your business income is subject to self-employment tax (SE tax) now is a good time to consider reorganizing your business to shield some of your business income by moving to an S corporation.
    • Capital gains tax rate increases. In 2021, the highest long-term capital gains tax rate is 23.8% (20% capital gains tax rate plus a 3.8% surtax as part of the Affordable Care Act) but if planned correctly, you could pay either nothing or 15% federal tax on long-term capital gains. Congress could see the sales of long-term securities and other assets as a valuable source of tax revenue by eliminating this preferential tax rate and instead using ordinary income tax rates (currently as high as 37%). Potential action: Actively manage investment profits, netting your gains against your losses. If you have any assets that have appreciated over time and intend to sell in the near future, consider trading in 2021 to avoid a potential increase in the capital gains tax rates.
    • Tax planning problems for your estate. There are several considerations to take into account when looking at your estate’s tax plan. First, under current law, say for example your parents bought one share of stock in 1980 for $10 and you inherit the share of stock when it’s worth $100 and immediately sell it for the same $100. You would not owe any federal taxes on the $90 difference. In the future, this feature, called stepped-up cost basis, may become limited or removed to increase tax revenue. Second, the estate tax rate currently set at 40% is under pressure to be increased. This is entirely possible when you consider that this tax rate was 55% in 2001. Potential action: Consider gifting money or securities to family, friends or a foundation during your lifetime. Individual gifts in 2021 of $15,000 or less ($30,000 for married couples) don’t count against the lifetime gift-giving limit.
    • Tax rate volatility. With huge federal deficits that are now beyond the scope of imagination, what will happen next? Just the latest legislation adds a whopping $1.9 trillion to what must be paid back. While interest rates are being held at historic lows to help lower the cost of this added debt, it cannot continue unabated. And the meteoric rise in home prices is just one of the costs of this low interest approach. The current proposals in Washington suggest an increase in tax rates is not too far in the distant future. Potential action: Do a forecast of your future income and tax rates. If you think tax rates and your taxable income will be increasing in the next few years, you will want to move as much money as possible into tax-advantaged accounts like Roth IRAs. You should also understand any state tax ramifications to help with your tax planning.

Moskowitz LLP Tax Planning coordinates retirement, insurance, investments, education funding, asset protection, estate and tax planning. Each affects the other and mitigates implications. Because we prepare the tax returns, and may be already offering business forecasting services, Moskowitz LLP is the one that has the information and how it interrelates to provide comprehensive financial positioning and strategic planning. Our tax attorneys execute the strategy for resulting in a seamless optimization of your tax and wealth goals.

Above all else, our tax check up and plans are time tested, cost effective, and practical for long term success.

Moskowitz LLP is a tax law and accounting firm that has dedicated over 30 years to representing individuals and businesses with civil and criminal tax problems, cleaning up accounting and tax messes, and providing tax and accounting advisory services. We offer practical and affordable tax check up and accounting solutions, business services, estate planning and administration.

Remember a blog post or email blast is not a substitution for obtaining personal legal and tax consultation. This information is not intended to be legal or tax advice nor does it form an attorney-client relationship between us.