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Tax Efficiency and Investing

In this show, Jason and Alex talk about the importance of integrating and closing the circle of advisers for a client. It is extremely important for a financial adviser to be working with the CPA to collaborate on behalf of the client to make sure their financial lives are maximized. Clayton “Clay Willits” was a guest speaker on the show, and he is IDA’s newest member of the team and leader of IDA Tax. He got his CPA license back in 1984 in CA and has been working in public accounting, tax, and then went back into the private industry as a CFO for several industries. The last 18 years, he has been working with individuals completing their tax returns and assisting with various levels of tax planning. Clay was a board certified flight-instructor.

Jason explains that incorporating the tax advice and financial planning together as a one stop shop is so beneficial for our clients. Alex explained how we always bring the CPA in as much as possible even when they are not in house to make sure that the best possible decisions are being made. IDA Tax is the in-house IDA tax division. Jason and Clay explain that this is a powerful proposal to be able to offer a sit-down meeting with both the financial adviser and the CPA in one meeting to maximize the time for the client.

Jason, Alex and Clay discuss specific end of the year tax strategies. End of the year is the perfect time for tax planning, especially for business owners that have businesses and business entities such at S-Corps, LLCs, Sole Proprietorships, etc., as they are the individuals that are able to utilize more complex tax planning strategies. Clay explained further that W-2 employees are more limited with their options to save money on taxes. He also stressed the importance of meeting with the CPA in November or December to discuss transactions they may enter into for business purposes such as purchasing a new vehicle or purchasing other capital expenditures to take advantage of bonus depreciation. 

Jason explains that it is also important for younger individuals making large sums of money to start planning for their retirement now, and there are more complex savings strategies that can be implemented to save much more money on taxes than the traditional 401(k), IRA, or SEP IRA account structures. In the proper situation, a solo 401(k)/profit sharing plan, Cash Balance plan, or Defined Benefit plan can be included, and this could allow clients to save hundreds of thousands of dollars in tax savings over an extended period of time, and also save MUCH more for retirement. These more complex plans must be setup sooner, and the funding doesn’t have to happen by year end. A lot of times this can happen by the time they file their tax return, even if they file an extension.

Clay talks about some of the biggest pitfalls for financial advisers in relation to tax planning. One of the biggest mistakes that he has seen is in the timing of realizing capital gains and capital losses. He had a client that sold a piece of real estate for a large gain in one year, but didn’t tell the financial adviser about the transaction, and there were substantial temporary capital losses that could have been realized in the taxable account. Clay emphasized that these losses MUST be realized in the year the gain occurs. This is also known as tax loss harvesting, which this strategy is utilized every day at IDA for our clients.

In this show you will learn about:

– Introduction to Clayton “Clay” Willits, Lead CPA of IDA Tax

– The importance of collaboration between a client’s Financial Adviser and CPA.

– Specific strategies for business owners to save money on taxes, and the best time for tax planning.

– Some of the biggest pitfalls in tax planning for Financial Advisers and CPAs

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