C0VID and Tax Planning for the Lucky and Unlucky
C0VID and Tax Planning for the Lucky and Unlucky: The events of the past few years have brought significant changes to the lives of almost everyone, and our financial future as a country is shaky as a result! As the year is winding down, there is still time to at least make one glass of lemonade from all the lemons, but people need to put time on their calendar in November to focus on their own opportunities, or risk not discovering the one benefits they might receive.
There are many categories and levels of financial effects that have taken place, but for simplification in this case we will separate everyone into two groups. People negatively affect (many ruined or greatly wounded) and those on the other side, people and companies that are benefiting financially, simplified, the unlucky and the lucky.
For the unlucky that are down but not out…
For a business owner whose income is down and cash flow is tight, there are still some special C0VID tax incentives available that can provide much-needed help with cash flow. If you have employees, had employees, will have employees, and have a building they work in, then there is probably some significant help available for you! Click here to access a tool created to help you find and estimate what benefits are available and think how that might help your cash flow!
For the individual whose income is down or a married couple who have lost one of two jobs, but still a 401(k), IRA or other retirement accounts, then this could be a great opportunity to do some ROTH conversions and tax Uncle Sam’s name off your retirement savings.
With less income in 2021 or a business loss instead of a gain, this could be a good opportunity to convert those pretax accounts to Roth or Roth alternatives that move you away from legislative risk and are under contract law. (See our blog on the proposed tax bill to learn more)
But don’t speculate. Have a tax planner put your approximate numbers in their tax software and provide some what-if returns. Adjust for different income or Roth conversion amounts and dial it in, so you get it right and don’t trigger a surprise tax or lose out on credit because you made ten dollars too much.
Be careful, but take advantage of opportunities available now. In retirement, you may have more tax-free growth and income because of this crazy time we are living in!
The lucky are up in income, and there are many advanced tax planning tools out there to help you mitigate the tax consequences of higher income. (here is a blog on just a few of the strategies available – Link to Conservation Easement)
There’s always something that can be done, but again look at the calendar and put the time to meet with someone, and then evaluate the different approaches that they present. It would be a shame if you let the time go by without planning your outcomes in advance, as you might gain financially only to lose much of it to unexpected taxation.
Proactively planning your tax outcomes is one of the few things that are within your control in 2021!
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