In this episode of Practical Tax, tax attorneys Steve Moskowitz and Liz Prehn discuss the benefits of proactive financial planning. This strategy may feel like a hassle, but, in the end, it helps to ensure you don’t pay a penny more in taxes than you have to. Listen to the podcast to learn more!

Episode Transcript

Speaker 1: 00:00 Every year about this time, I say it's going to be different. I'm going to be prepared. I'm going to be ready.

Speaker 2: 00:04 You're listening to Practical Tax, with tax attorney Steve Moskowitz.

Steve Moskowitz: 00:08 Hi. I'm tax attorney Steve Moskowitz with longtime Moskowitz tax attorney Liz Prehn. And if you didn't take the benefits of 2018 tax planning, and your punishment was a nasty bill that maybe you could have avoided in 2019, don't hang your head in shame or sorrow. Talk to us. Let's see what we can do -- first, to deal with those taxes under the new law that you can't pay. And secondly, to see about changing that for next year with what we can do about it. There is so much in tax planning, especially with the new law if you're in business. We want to talk to you about both. Taking care of the taxes that maybe you can't pay now, and trying to avoid them in the future. And even if you can pay it, the richest person on the planet wouldn't pay a penny more in taxes than he or she had to, which we know because the wealthy people employ lots of people to help them minimize or eliminate their taxes. Look at the Fortune 500, some of them make billions and pay zero in taxes.

Liz Prehn: 01:09 I think what we're seeing is that people are really surprised how this new tax reform really affects them, for at least the next five years.

Steve Moskowitz: 01:17 That's right. There are winners and losers.

Liz Prehn: 01:19 And there's a lot of losers here in California, sadly. But there's things that can be done, especially if you're self employed. If you're not self employed, I will walk you through and coach you up the best I can. It's just there's not a ton out there that you can do other than maximize your retirement accounts and maybe do some family planning. I'm starting to see the results come in, and I was even surprised with my own tax bill, right? Talk about the cobbler's children, right? So I was surprised to see how it affected me because I'm relatively benign. There's a lot of options for people and...

Liz Prehn: 01:53 So I would like to give you an example of somebody that did take advantage of tax planning, but it is one of those things that is... it's very proactive. It seems like it might not be worth it at the time because you don't really know how it's going to affect you. But one particular person that I'm just thinking off the top of my head, we were able to save her about $400,000 with some very simple business planning and entity formation and designations. That really worked for her. It's not costing her a lot on a monthly basis. A little bookkeeping. We did advise that, get that happening. A couple yearly fees in terms of entities. But the overall tax savings is something like over $385,000.

Steve Moskowitz: 02:36 Along with being good economic reasons, along with being good business practice, it helps with the taxes, but it helps in other aspects of the business too.

Liz Prehn: 02:43 Sure. It helps organizing. She probably has the ability now to be more price point specific on her sales on certain items and things like that. So I think overall it's breaking out. She's very happy because she was proactive. A lot of people chose not to do that despite Steve talking about it all over, anywhere we can. And it was exciting. I think every tax nerd out there is really kind of excited to see how the law comes into play now, and how it's actually affecting people, and what people can do.

Liz Prehn: 03:13 If you can't, if you didn't, it's still really early. It's April. It's April 2019. If you're going to get a bill April 15th or so,