MONEY matters

Mark Zaifman's thoughts on money, global economic trends and politics
Don’t Let the Tax Tail Wag the Dog
Mark Zaifman   |    Tue, Feb 27, 2018 @ 10:59 AM

It’s often one of the most common mistakes investors make. By that I mean, letting the amount of capital gains tax owed on the sale of your asset, whether that’s a stock, bond, real estate or business, dominate your decision process.

It’s never easy to pay taxes, especially a 20% capital gains tax. So instead of diversifying your overall investment portfolio and not concentrating too much of your net-worth in say one stock for example, you let it ride.

Soon, five, ten, twenty+ years goes by and now this asset that has strongly increased in value and makes up close to 50% of your total investment portfolio. You know having too many eggs in one basket is risky, you know and have seen and read enough about the importance of diversification and maintaining a well balanced portfolio, yet still, even with that self-awareness, you’re allowing the tax tail to wag the dog.

Update: Tax Planning Techniques & the Rise of the Backdoor Roth IRA
Mark Zaifman   |    Tue, Mar 21, 2017 @ 02:59 PM

I wrote this blogpost, Tax Planning Techniques & the Rise of the Backdoor Roth IRA a couple years back due to the intense interest from many clients about the Backdoor Roth IRA tax planning technique. It’s a bit surprising this savvy technique has not been shut down. It’s of course entirely legal and perhaps could be called a tax loophole. That said, as long as this option is available, why not take advantage of it? Tax planning at its core is about deferring taxes to a later date and or minimizing your current tax liabilities.

Tax Planning Techniques and the Rise of the Backdoor Roth IRA
Mark Zaifman   |    Mon, Mar 25, 2013 @ 02:44 PM

The Roth IRA has been one of the best tax planning techniques to come out of Washington, DC in a very long time. But because the Roth comes with income limit eligibility limitations; (maximum income for singles in *2017 - $133,000 ) and (maximum income for married couples - $196,000 ), lots of high income earners have been unable to take advantage of this option.  *These dates and figures have been updated for 2017.

Like many of you, including yours truly, that have already received loads of info about the ‘backdoor Roth IRA’ from tax planning firms or your CPA, below is a consolidation of the best of the best that I have received recently on this topic. All due credit belongs to the numerous sources that kindly sent me info about the new ‘tax kid’ on the block - the backdoor Roth IRA - thank you!

Tax Return Mistakes and Little White Lie(s)
Mark Zaifman   |    Fri, Mar 01, 2013 @ 01:23 PM

Mistakes, lies, omissions, inflating the truth - these can all amount to the same end. Major problems with the IRS and a possible audit.

Retirement Planning - What To Do When
Mark Zaifman   |    Wed, May 02, 2012 @ 05:01 PM
Tax Planning - 12 Ways to Avoid an IRS Tax Audit in 2012
Mark Zaifman   |    Mon, Feb 06, 2012 @ 02:41 PM
Creating A Personal Financial Plan in 2012 - Investment or Expense?
Mark Zaifman   |    Thu, Dec 29, 2011 @ 03:07 PM

This is the time of year people often start thinking about getting their financial house in order. So if creating a personal financial plan is on your list as a personal and financial goal to accomplish in 2012, you won’t be alone.  As you survey the landscape of fee-only financial planning options available, keep this in mind;

Creating and implementing a comprehensive financial plan that

  • optimizes your cash flow and investments;
  • aligns your money with your values;
  • provides you a smart and strategic financial roadmap that’s easy to understand and implement;
Why You Need a Tax Strategy for Your Business
Mark Zaifman   |    Mon, Sep 19, 2011 @ 04:16 PM

Ask a small business owner to describe what makes their business tick and most of the time they can answer this question with superb detail and enthusiasm. Now ask this same, passionate, small business owner to describe their overall tax strategy and most likely you’ll hear silence.

Of course this silence is not a mystery.  Most small business owners wear at least five hats to begin with when operating their business and their tax and finance hat is usually not one of their favorites. That’s all too understandable, but here’s why it's important to have a tax strategy for your business.

Like any business owner, if you’re profitable, (or even if you’re not) paying taxes is going to be one of your major expenses - many times one of your largest. As a former practicing tax accountant, I wish I could say the tax code is fair and you’re operating on a level playing field. That’s not the case. The deck is stacked against the little guy/gal and until there’s actual and real tax reform, it’s going to stay that way.

Lowering Your Odds of an IRS Audit

Because the tax code is so complicated, most small business owners opt to file a Schedule C - Sole Proprietor return. And because most small business owners in general tend not to be the best record keepers, the IRS loves to audit Schedule C filers. Even if you did everything right and assuming you have nothing to hide, an IRS audit distracts you from your business at hand and very often causes high anxiety and stress.

I’m a big fan of operating your business as an S corporation. It’s not for everyone, that’s for sure. But if you haven’t had a CPA or financial planner run a tax comparison of what business entity would be most optimal to operate your business or practice, I highly suggest you have this analysis done prior to the end of the year.

Very few S corporation tax returns filed each year are audited. In recent years, the audit rate has been 0.40% annually. That’s the kind of odds a tax accountant loves. How does this compare to other business entities audit chances?

•    Partnerships: 0.40
•    C Corporations: 1%
•    Individual’s filing Schedule C: 1.17%

Although statistically there doesn’t appear to be a big difference between an S corporation audit risk and a Schedule C filer - the difference is night and day. With the IRS eagerly on the pursuit for fees and income, becoming a tax savvy small business owner is more important than ever.

 Click me


data source: TurboTax 

photo by saturnism

3 Financial Planning Items to Check Off Your 2011 To Do List
Mark Zaifman   |    Wed, Sep 07, 2011 @ 06:09 AM

Although summer is just winding down, it's already time to look at your 4th quarter financial tasks. Here is the last in the four part installment from the Financial Planning Association (FPA) task list.

4 Investing Truths by Vanguard
Mark Zaifman   |    Wed, Jun 29, 2011 @ 01:56 PM

If you are like many others, you may think investing is complicated. But by simply knowing your goals and options and then picking the right investing partner, becoming a successful investor is easier than you think. Vanguard does a great job at explaining the steps you’ll need to take in making smart investment decisions as well as guide you on becoming a successful investor. Check out these excellent articles - Vanguard’s 4 Investing Truths:

1) Vanguard’s Investing Truth - RISK:

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