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Tax Planning for Financial Advisors

Presented by Catherine Tindall, CPA

www.DominionES.com Admin@DominionES.com

Main Points for Today

• Step 1: Know What You Owe!

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• Step 2: Where Do You Want to Go?�
• Step 3: “Cashless” (Not Quite Painless) Planning Techniques�
• Step 4: Strategic Cash Moves for Tax Management�
• Bonus: Looking Ahead – Succession Planning Concepts�

Presentation Objectives

• I’m going to make sure you know the “red flags”

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• I’m going to cover some of the complexities here but want to keep everything at ACTION level for you

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• GOAL: You know what you need to be a confident conversation partner with your tax professional��

Polling Question 1

• How Confident do you feel in your own tax planning?�

A) Very confident, I have a very structured relationship with my own income tax and know I have the right strategy in place�

B) Somewhat confident, I feel like I could do more than I’m doing now but have good structure in place

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C) Not Confident, I have active concerns about my tax planning and structure��D) Feel Behind – I don’t have structure in place for myself��

Background of Presenter

• Catherine Tindall, CPA principal at Dominion Enterprise Services�
• I’ve had over 16,000 people attend my CPE presentations (CPA Academy, Intuit, Earmark)�
• CPA firm with niche in strategic tax planning and income tax returns for Financial Advisory Firms (IBD, RIA, IAR, & 1099 Advisors)�

Quick Housekeeping

• Q&A will be handled separately at the end of the presentation�
• No specific tax advice will be given for a taxpayer situation outside of a formal engagement��Copies of slides available & tools��Send me a LinkedIn DM: Catherine Tindall, CPA�(https://www.linkedin.com/in/ctindallcpa/)��Ctindall@DominionES.com�

www.DominionES.com Admin@DominionES.com

Main Points for Today

• Step 1: Know What You Owe!

​

• Step 2: Where Do You Want to Go?�
• Step 3: “Cashless” (Not Quite Painless) Planning Techniques�
• Step 4: Strategic Cash Moves for Tax Management�
• Bonus: Looking Ahead – Succession Planning Concepts�

The first place to start in saving taxes is your accounting infrastructure �

Correct Projected P&L AND Balance Sheet �AKA Strong Recordkeeping & Forecasting Function�- Up to date and accurate financials�- Forecasted performance through end of year�

• Have a tax forecast run prior to year end �AKA Strong Tax Professional Relationship��(because the real best secret to saving taxes is having a systemized relationship with tax, typically from a good tax pro)�

Essential Accounting Infrastructure

Essential Accounting Infrastructure

• The importance of strong recordkeeping�
• Ability to know your margins/performance in real time�
• Gives the infrastructure to look forward�
• Determines your taxable income base before planning

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• Allows you to focus objectively on the performance of areas of the business

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• Gives you a way to measure Lead KPI (New Sales Calls) vs Lag Measures (New Revenue)

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Essential Accounting Infrastructure

• Top Recommendations from experience�
• Recordkeeping should be an automatic function in the business – not something that needs to be kept up with by the firm owner�
• Having a formal accounting system – like QuickBooks Online – should be used following accounting basic standards (non-comingled funds, statement reconciliations, and full Balance Sheet)

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Essential Accounting Infrastructure

• The importance of tax forecasting �
• Ability to know your liability before making changes�
• Ability to run scenarios for planning ideas
• Ability to see how the “game” is going before it’s over to make changes�
• Do we want to change AGI? �
• Does a technique make more sense this year because it’s a high income year or a low income year?�
• Is just paying the taxes the most strategic move in the business? (Paying down debt, building up non-qualified accounts)�

Essential Accounting Infrastructure

• The biggest struggles I see in tax planning on the advisor side come from:

�1. Not timely financial data – and therefore inaccurate liability forecasting��2. Accounting systems are not correct, so reporting phantom income (had someone last year paying tax on 100k that was being doubled) or missing data

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www.DominionES.com Admin@DominionES.com

Main Points for Today

• Step 1: Know What You Owe!

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• Step 2: Where Do You Want to Go?�
• Step 3: “Cashless” Planning Techniques�
• Step 4: Strategic Cash Moves for Tax Management�
• Bonus: Looking Ahead – Succession Planning Concepts�

Tax Strategy needs to be Strategic�

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What are the needs of the business?

• High Inorganic Growth Practice�(artificially low profit margin – �HINT this is the most efficient way to save tax generally)�
• Stable Organic Growth Practice �(steady profit margin, often lifestyle practices)�
• Sale of Practice?�(trying to coordinate with valuation)�
• Acquisitions or Succession starting? �(cash needed/financing needed/additional operational drag)�

1. What’s the Actual Current Tax Liability?�(I.e. if we do nothing, what will your total tax bill be for 2026)�
2. What can we implement this year?

(Planning Technique Scenarios then new tax liability)�

3. With our updated tax liability - How do estimated payments need to change?

• Quarterly Estimated Payments (More or Less!)
• Withholding through payroll ��

Tax Strategy needs to be Strategic - Process�

Some recommendations on Quarterly Payments:

1. Once you have your expected liability – focus on allocating either monthly or quarterly (depending on revenue timing) to a tax savings account, so taxes are saved from profits they come from
2. Then focus on meeting safe harbor minimums (90% of current year of 100% of prior year tax)
• Because there’s no benefit to “pre-paying” full liability
• This helps in case you want to deploy that saved cash into strategies to lower your income taxes proactively (like a year end retirement contribution strategy)��

A Note on Quarterly Estimates

1. Essential Infrastructure should be working – Bookkeeping and tax forecasting process during the year�
2. Determine what the strategic needs of the business are first to drive tax planning aligned with goals�
3. Update your quarterly estimates to plan and compare performance against expectations to keep from overpaying during the year�

Step 1: Know What You Owe!

www.DominionES.com Admin@DominionES.com

Main Points for Today

• Step 1: Know What You Owe!

​

• Step 2: Where Do You Want to Go?�
• Step 3: “Cashless” Planning Techniques�
• Step 4: Strategic Cash Moves for Tax Management�
• Bonus: Looking Ahead – Succession Planning Concepts�

Common Tax Planning Opportunities

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• At the end of the day, we’re optimizing for 3 things in tax planning for your firm:�
1. Your mental sanity & your time�
2. Value Generation in the Growth of the Asset that is your practice�
3. Using cash strategically and not running out of it (OXYGEN!)�

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• Why the emphasis on cash?

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• I start with “cashless” planning first�
• Then for cash tax planning what “Cash burn” is worth a planning outcome that will ultimately increase the value in the business.�
• Always keeping in mind, the true opportunity “cost” to the advisor – your time, and what the next best use of that cash is��(Side note – good to do an annual time study to know the value of your time and hopefully see it go up)�

Common Tax Planning Opportunities

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Don’t waste time on where it could be better spent growing your practice multiple for the sake of saving some tax “waste”

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Scrutinize activities pursued because of “tax savings”

(Most often I see this with Real Estate, “Hobby” Ventures or chasing small write-offs)���

Common Tax Planning Opportunities

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If you have active real estate activities, besides the strategy I’m going to be talking about later,��Real Estate “Depreciation” gaming through cost segregation studies is one of the few best tax strategies in the code available to you when deployed correctly, but for you it may be non-strategic.��From working succession engagements with firm owners, the potential upside of a practice sale is unlimited vs real estate which can only appreciate so much.�

Real Estate – A Quick Note

“Cashless” Tax Planning Techniques

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• Entity Choice – Behind the Curtain of “The Magic S-Corp”�Fringe Benefits & “Reasonable” Compensation
• “One Pocket to Another”
• Passthrough Entity Tax
• QBI Optimization (Statutory W-2)
• Hiring Kids/Spouse
• Health Accounts (HSA & Reimbursements)
• Loss & Gain Harvesting (You know these, will skip)
• Cost Segregation (Skipping)

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S-Corporations!

• Mechanism:�
• Limits the self-employment tax to “Reasonable” Compensation of the Owners via W-2�(Needs to be Market Based we use this tool: RC Reports)�
• Allows for a Passthrough Entity Tax (PTE) payment in most states (i.e. getting you around that SALT deduction limitation)

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S-Corporations!

• Rough Example:

S-Corporation with a PTE Payment (Assuming 6% State Rate, MFJ)��500k Profit with 120k of Owner’s compensation (So Total net to owner 620k) and PTET payment of 30k = ��10k Saved Federally for PTE�15k Saved in Self-Employment Taxes�Total Saved 35k annually, for just the hassle of extra filings�

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S-Corporations!

• 35k over 10 years, if reinvested back into the firm to generate additional equal revenue would be roughly 770k of additional exit value @ 2.2X multiple�
• Like you advise your clients, these savings can really add up when redeployed correctly!�

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S-Corporations - Complications

• Fringe Benefits typically added to income of >2% Owner
• Reasonable Compensation is required i.e. W-2 to Owners when taking distributions
• Limitations when dealing with Multiple Owners�(Doing uneven distributions difficult, can use more complex structures to achieve)
• Assignment of Income Issues
• Care must be taken for how revenue is reported - Fleischer Case – Tax Adviser & My Podcast On This�Typically 1099’d income is “stuck” on your personal returns with care needed to get into entity structure correctly – there are some strategies to mitigate this

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One Pocket to Another - PTE

• Passthrough Entity Tax Credit takes advantage of loophole for 10k State & Local Tax Cap on Federal Returns. (Raised to 40k in 2025-2029 with income phaseout starting at 500k MAGI, often still QBI advantage to do PTE for those in QBI range)�
• Particularly helpful on non-itemized returns as well!�
• State by state program differences, often needs to be done before end of year for benefit�
• Typical benefit is your top bracket Federal rate (e.g. 35%) for each dollar that is paid via PTE – e.g. Pay 20k, save 7k

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One Pocket to Another – QBI

• QBI Optimization (20% Deduction) (Permanent)
• Statutory W-2 & Insurance (Often Eligible) vs. Brokerage Income because of classification
• Regular Phase out starts 403k MFJ / 201k Others
• Wage Payments to remove 50% cap
• Strategy: Artificially Controlling Profit/AGI to get QBI within phase out ranges

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• Recent client case with significant Insurance income prior CPA missed QBI – 70k annual tax hit
• Another case doing pre-tax retirement was >50% savings because of phase out

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One Pocket to Another – Family

• Need someone to lick stamps for a direct marketing campaign?
• Hiring Kids – Standard Deduction “Free 15,750” (Often still subject to SS taxes, so not often a great benefit for effort)
• Must pay a market based wage for bona fide services
• (Earned income makes them eligible for Roth contributions)
• Better benefit under Sole Proprietorship/Partnership
• If adult children in business – family leave credits for parental leave�(Can be significant, had a client this year get a 15k tax credit)
• Hiring Spouse – Participation in Retirement Plans
• MFJ vs. MFS Consider it
• Consider 529, HSA, and Spousal IRAs

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Polling Question 2

• Which strategies mentioned so far do you find most appealing for yourself?�

A) S-Corp With PTE�

B) QBI Optimization

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C) Family Deductions��D) Real Estate��

www.DominionES.com Admin@DominionES.com

Main Points for Today

• Step 1: Know What You Owe!

​

• Step 2: Where Do You Want to Go?�
• Step 3: “Cashless” Planning Techniques�
• Step 4: Strategic Cash Moves for Tax Management�
• Bonus: Looking Ahead – Succession Planning Concepts�

Strategic Growth Deductions

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• The best tax “savings” is investing in your growth
• Accelerating strategic deductions defers income tax which makes an “artificially low” profit margin
• Examples of strategic deductions
• Professionalizing the Business (software, admin infrastructure)
• Coaching Programs
• Talent Acquisition
• Outside Consulting & Marketing

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Strategic Growth Deductions

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• Example:��

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Strategic Growth Deductions

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• What is the current bottleneck in the business holding it back from where it is going next? Too many low value clients? Weak systems? Client acquisition? Too much of your time as an owner?

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• How do we use profits today to build the firm we want in the future and bring it into the present�
• Paying debt, professionalizing functions, de-risking �delivery through systems, enough support personnel�

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Strategic Growth Deductions

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• Tactics:
• Identify how much profit is “safe” to reinvest (Should be after tax, after personal needs, and after working capital)
• Identify the bottleneck – if you work on a non-bottleneck, you will not see growth since the bottleneck still limits the business
• Target investments that you are comfortable making – consider the “risk” of the deduction and what return is “good” for you
• Have measuring systems in place especially when you are not sure on the return or it would be a large investment
• i.e. Marketing advertising, consultants, programs
• Have clarity and protection around performance from 3^rd parties�

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Smaller Deductions-

• Augusta�“self-rental” of personal property up to 14 days tax free
• Payments need to be reasonable, can’t exceed 14 days
• Must 1099, and record keep (often cumbersome)�
• Auto Mileage
• Recommend MileIQ
• Deductibility of vehicles subject to actual business usage�
• Home Office
• Must be exclusive business use of section of home

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Deduction Planning for Home

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• (make sure you keep a folder for improvements you make to your primary residence even if you don’t deduct home office to help reduce your gain when you sell if you’re going to exceed the MFJ gain exclusion)�
• Do quick “Napkin Math” Home office on deductions versus standard rate on the cost of recordkeeping – $5/SQ Ft up to 1,500 Deduction ($500 for a click)

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Note on Significant Charity

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• Consider DAF (Donor Advised Funds) for ability to control deduction timing (can be benefits to bunching deductions)
• If significant appreciated positions, ability to avoid capital gains taxes on contributions into DAF while keeping things simple for your charity
• Under new tax law, changes in the charitable deductions, so I recommend having a forecast done if this is a significant amount (such as if you do 10% per year)

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Retirement Contributions

• Last for a reason: My General Philosophy – Consider the Opportunity Cost of the Capital, Consider your “portfolio” risk of your assets
• Don’t Forget Tax Credits for Employer Plans (Fairly Small)

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• Close to retirement advisors consider Defined Benefit Plans/Cash Balance Plans (Can also dovetail nicely with succession planning 100k+ & combos with 401k)�
• Consider discrimination testing requirements if you have employees – what stage the business is at and if retirement plans would help get better talent.

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www.DominionES.com Admin@DominionES.com

Main Points for Today

• Step 1: Know What You Owe!

​

• Step 2: Where Do You Want to Go?�
• Step 3: “Cashless” Planning Techniques�
• Step 4: Strategic Cash Moves for Tax Management�
• Bonus: Looking Ahead – Succession Planning Concepts�

Succession Planning For Today

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• Getting your accounting system to work for you
• Getting your tax strategy proactive in your current state
• Consider the investments back into the practice that will increase your exit value (strategic deductions for future growth)
• Consider getting a valuation done to see key weaknesses (like key man risk) with your current firm set-up
• Start to think about how you are planning to exit so you can structure with that in mind – Internal vs. External

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Succession Planning For The Future

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• Internal Succession
• Contingency planning in place today – Emergency exits happen!
• Consider complications if not a full 100% sale
• If selling in tranches –
• Consider doing a draft operating agreement BEFORE LOI
• Consider full modeling of impacts for the buy side �(Stock vs. asset acquisition have significant tax differences)
• Consider if Seller Financing – Installment Sale Treatment

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Succession Planning For The Future

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• External Succession
• Consider continued role in the practice (continuing to work in the firm) – you can sell your firm but keep your client relationships, better to transition well before you’re ready to leave
• Consider tax impacts of large capital gain upfront
• Have a more detailed valuation completed early– target areas for improvement with the eye for external sale�(reducing key man risk, revenue concentrations, marketing niche etc.)
• External buyers are sophisticated, and will use that to their advantage.

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Presentation Objectives

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• GOAL: You know what you need to be a confident conversation partner with your tax professional – Did we get there?�
• Do you feel like you have a good overall framework to be thinking about your accounting infrastructure, basic tax planning strategy, and how these play into succession planning?��

Polling Question 3

• How confident do you feel now to know what steps you should take next in your own tax planning?�

A) Very Confident about what I should do next�

B) Somewhat confident – going to research more

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C) Not Very confident – Need to do significant research��D) Still confused on what I should be doing or where to start��p.s. I have a standard year of tax planning checklist if you send me a message/DM for it��

CTindall@DominionES.com

What Now – Contact Info

• I’m Active on – LinkedIn (Send me a DM of any questions after the conference) Catherine Tindall, CPA��Or join my Tax Newsletter for Advisors (Same one we send to our clients)��Advisor Tax Assessment (Like a 1-Page Financial Plan)

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Testimonials:

• "I thought the assessment felt good it didn't feel you know pushy at all like it was extremely thorough I mean I've never been through anything like this with an accountant before so it's certainly unique to me and anyone that I've ever talked to.

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• I feel like this is the thing that I've been searching for for so long and wanting is to have a tax advisor as opposed to a tax filer and that's this is what that relationship feels like so I thought I thought the assessment was excellent.“ A Recent Advisor Client�� ��

CTindall@DominionES.com

Q&A

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• Feel welcome to find me after for any questions or you can reach out to my email below or LinkedIn DM to Catherine Tindall, CPA

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• Copies of slides available along with other tools we have that can help you ��

SCAN THE ABOVE QR CODE BEFORE AND AFTER EACH PRESENTATION TO GET CE CREDIT

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