The top five post-election tax topics where you can be proactive
Tax planning and tax resolution may be on your mind with election season ending and the tax preparation season coming up.
This is an “infomercial” from The Dig contributor Dan Hoicowitz, CPA. Dan is the founder of Tax Llama, an accounting firm specializing the synchronization of GAAP, the IRS code, digital assets, and data science to find hidden value for clients. Dan has an MA in Math/Stats and an MA in Econ.
Elections, specifically presidential ones, always bring change and uncertainty no matter where on the political spectrum you rest. The tax proposals of both major party candidates will have ramifications for all individuals and businesses. Moreover, earlier this year the IRS started sending out notices related to unpaid tax balances. The federal government is a taxpayer’s involuntary business partner no matter who wins the White House. As a result, tax planning and tax resolution become imperative with election season ending and tax season coming up soon. Both are tools taxpayers can use to help manage the change and uncertainty associated with the current financial environment.
Below is a brief guide on areas you can be proactive in 2024-2025.
1. Post-election IRS scenario planning
Both presidential campaigns have indicated a willingness to reform the tax code should they win the election. Individuals and businesses should be ready to modify their tax planning strategies even if the new president faces a divided congress.
2. Strategize for the Tax Cuts and Jobs Act (TCJA) Expiration
Several key provisions of the Tax Cuts and Jobs Act are set to expire. Both candidates have expressed an interest in making certain provisions of the TCJA permanent, but that leaves other parts an open question. This is where tax planning could help mitigate the uncertainty associated with parts of the TCJA that might be modified.
3. Self-employment tax planning
Self-employed taxpayers must wear a variety of hats in their business, often managing healthcare, student loan debt, retirement, and self-employment taxes. Without the right planning self-employed individuals may face an unnecessary liability come April 2025.
4. Roth Conversions
For those unfamiliar with a Roth conversion, this is when a taxpayer converts a traditional pre-tax IRA into a post-tax retirement account. Taxes in the future could go up across the board, so this tax benefit might disappear entirely and, so, now may be prime time to consider a Roth Conversion.
5. Remediating Tax Problems
Earlier this year, the IRS restarted collections and sending letters to taxpayers. This means there will be a likely uptick in IRS interactions. There has never been a more crucial time to remediate and preempt potential IRS tax problems. Taxpayers do have a variety of tools available for them to help work on resolving tax issues including: Offer-in-compromises, Installment Agreements, and Innocent Spouse Relief. Now technology exists to find out if the IRS has opened any issues against a taxpayer that could impact their taxes, sometimes even before a letter is sent.
To get a free in-depth tax planning primer for 2024-2025, and to find out what llamas have to do with taxes, send an email with the subject line “2024-2025 primer” to dan@taxllama. Be sure to visit www.taxllama.com for more helpful hints.
Disclaimer: The information contained in this newsletter is strictly for informational purposes and does not constitute tax, legal, or financial advice. Please consult with a professional for specific advice tailored to your situation.
© Francine McKenna, The Digging Company LLC, 2024