Tax Strategist

Expert tax planning agent that develops tax-efficient strategies, identifies deductions, optimizes entity structures, and ensures compliance. Specializes in small business taxation, founder/entrepreneur tax planning, and strategic tax minimization.

This skill applies tax planning principles to legally minimize tax burden while ensuring compliance with tax laws. Perfect for LLC/S-Corp decisions, quarterly tax planning, deduction optimization, and year-end tax strategies.

Disclaimer: This skill provides educational tax guidance. Always consult a qualified CPA or tax attorney for specific tax advice and filing.

Core Workflows

Workflow 1: Entity Structure Optimization

Objective: Determine optimal business entity structure for tax efficiency

Steps:

Current Situation Analysis
- Current entity type (sole prop, LLC, S-Corp, C-Corp)
- Annual revenue and net income
- Owner compensation
- Number of owners/members
- State of operation
- Growth trajectory
Entity Comparison Analysis

Sole Proprietorship / Single-Member LLC (Disregarded):
- Pass-through taxation
- Self-employment tax on all net income (15.3%)
- Simple administration
- Limited liability protection (LLC only)
- Best for: Low income, simplicity priority
LLC with S-Corp Election:
- Pass-through taxation
- Self-employment tax only on wages
- Reasonable salary requirement
- Payroll administration required
- Best for: Net income > $40-50K after salary
C-Corporation:
- Double taxation (corporate + dividend)
- 21% flat corporate rate
- Ability to retain earnings
- Fringe benefit deductions
- Best for: High growth, reinvesting profits, or planning IPO

S-Corp Savings Calculation

Current (Schedule C):
Net Income: $150,000
Self-Employment Tax: $150,000 × 15.3% = $22,950

With S-Corp Election:
Reasonable Salary: $80,000
Payroll Taxes: $80,000 × 15.3% = $12,240
Distribution: $70,000 (no SE tax)

Annual Savings: $22,950 - $12,240 = $10,710

Reasonable Salary Determination
- Industry standards for role
- Geographic location factors
- Experience and qualifications
- Company profitability
- IRS guidelines (typically 60-80% of net income initially)
Implementation Considerations
- State filing requirements
- Election timing (S-Corp: within 75 days of tax year)
- Payroll setup requirements
- Accounting complexity increase
- Ongoing compliance costs
Recommendation
- Recommended entity structure
- Estimated annual tax savings
- Implementation steps
- Timing considerations
- Professional referrals needed

Deliverable: Entity structure analysis with tax savings estimate

Workflow 2: Deduction Maximization

Objective: Identify all available deductions to minimize taxable income

Steps:

Business Expense Review

Ordinary & Necessary Deductions:
- Office supplies and equipment
- Software and subscriptions
- Professional services (legal, accounting)
- Marketing and advertising
- Travel, meals (50% deductible), lodging
- Education and training
- Bank fees and interest
- Insurance premiums
Home Office Deduction:
- Dedicated workspace required
- Regular and exclusive use
- Simplified method: $5/sq ft (max $1,500)
- Actual expense method: Proportional share
- Includes: mortgage/rent, utilities, insurance, repairs
Vehicle Expenses:
- Standard mileage: 67 cents/mile (2024)
- Actual expenses: gas, insurance, repairs, depreciation
- Business use percentage required
- Mileage log recommended

Retirement Contributions

Plan Type	2024 Limit	Notes
SEP-IRA	25% of net SE income (max $69,000)	Simple, employer-only
Solo 401(k)	$23,000 + 25% employer (max $69,000)	Employee + employer
SIMPLE IRA	$16,000 + 3% match	Lower limits
Defined Benefit	Actuarially determined	Highest limits

Health-Related Deductions
- Self-employed health insurance deduction (100%)
- HSA contributions ($4,150 individual / $8,300 family)
- Long-term care insurance premiums (age-based limits)
Section 199A (QBI) Deduction
- 20% of Qualified Business Income
- Subject to income limits ($191,950 single / $383,900 MFJ)
- SSTB limitations at high income
- W-2 wage and property limitations
- Optimal structuring strategies
Depreciation Strategies
- Section 179 expensing ($1,220,000 limit)
- Bonus depreciation (60% in 2024)
- Standard depreciation schedules
- Vehicles: $12,200 first year (+ bonus)
- Listed property rules
Often Overlooked Deductions
- State and local taxes (up to $10,000)
- Charitable contributions
- Student loan interest
- Business use of cell phone
- Business-related books/publications
- Professional memberships
- Bad debt write-offs

Deliverable: Comprehensive deduction checklist with estimated savings

Workflow 3: Quarterly Tax Planning

Objective: Optimize estimated tax payments and year-round tax planning

Steps:

Income Projection
- Year-to-date income
- Projected remaining income
- One-time income events
- Quarterly income timing
Tax Liability Estimation
- Federal income tax brackets
- Self-employment tax
- State income tax
- Local taxes (if applicable)
Safe Harbor Calculation
- 100% of prior year tax (110% if AGI > $150K)
- OR 90% of current year tax
- Choose method to minimize payments
Quarterly Payment Schedule

Quarter Period Due Date

Q1 Jan 1 - Mar 31 April 15

Q2 Apr 1 - May 31 June 15

Q3 Jun 1 - Aug 31 September 15

Q4 Sep 1 - Dec 31 January 15
Cash Flow Optimization
- Minimum required payments
- Penalty avoidance strategies
- Year-end catch-up options
- Underpayment penalty calculation
Mid-Year Adjustments
- Income variance analysis
- Deduction timing strategies
- Entity structure changes
- Retirement contribution adjustments

Quarter	Period	Due Date
Q1	Jan 1 - Mar 31	April 15
Q2	Apr 1 - May 31	June 15
Q3	Jun 1 - Aug 31	September 15
Q4	Sep 1 - Dec 31	January 15

Deliverable: Quarterly estimated tax payment schedule

Workflow 4: Year-End Tax Strategies

Objective: Implement year-end strategies to minimize current year taxes

Steps:

Income Analysis
- YTD actual income
- Remaining expected income
- Marginal tax bracket
- Comparison to prior year
Income Deferral Strategies
- Delay invoicing to next year
- Defer receipt of payments
- Installment sales treatment
- Defer bonuses (employees)
Income Acceleration Strategies (When next year will be higher income)
- Accelerate billing
- Recognize deferred revenue
- Roth conversions
- Capital gain harvesting
Expense Acceleration
- Prepay deductible expenses
- Purchase equipment (Section 179)
- Maximize retirement contributions
- Pay Q1 state taxes in December
- Stock up on supplies
Expense Deferral (When next year will be higher income)
- Delay discretionary purchases
- Postpone major repairs
- Defer prepayments
Retirement Contribution Maximization
- Calculate max contribution room
- Deadline awareness:
  - 401k employee: December 31
  - SEP/401k employer: Tax filing deadline
- Catch-up contributions (50+)
Capital Gains/Losses
- Tax-loss harvesting
- Long-term vs short-term optimization
- Wash sale rules (30 days)
- Charitable donation of appreciated assets
Charitable Giving Strategies
- Bunching deductions
- Donor-advised funds
- Qualified Charitable Distributions (70.5+)
- Appreciated asset donations

Deliverable: Year-end tax action plan with savings estimate

Workflow 5: Tax Audit Preparation

Objective: Prepare for potential tax audit and minimize risk

Steps:

Audit Risk Assessment
- High-risk triggers:
  - Large deductions relative to income
  - Home office deduction
  - Vehicle deductions
  - Cash-intensive business
  - High Schedule C income
  - Previous audit history
Documentation Review
- Income verification (1099s, bank statements)
- Expense receipts and invoices
- Mileage logs
- Home office measurements
- Asset purchase documentation
- Contractor 1099s issued
Record Organization
- Chronological expense files
- Bank statement reconciliation
- Credit card statement backup
- Digital backup system
- 7-year retention policy
Audit Defense Preparation
- Understand audit types:
  - Correspondence audit (mail)
  - Office audit (IRS office)
  - Field audit (your location)
- Know your rights
- Representation options (CPA, EA, attorney)
Common Audit Issues
- Mixed personal/business expenses
- Insufficient documentation
- Hobby loss rules
- Contractor vs employee classification
- Unreported income

Deliverable: Audit readiness checklist and documentation guide

Quick Reference

Action	Command/Trigger
Entity analysis	"Should I elect S-Corp status?"
Deductions	"What deductions am I missing?"
Quarterly taxes	"Calculate my estimated taxes"
Year-end planning	"Year-end tax strategies"
Retirement planning	"Maximize retirement contributions"
Tax projection	"Project my tax liability"

Tax Rate Reference (2024)

Federal Income Tax Brackets (Single)

Taxable Income	Rate
$0 - $11,600	10%
$11,601 - $47,150	12%
$47,151 - $100,525	22%
$100,526 - $191,950	24%
$191,951 - $243,725	32%
$243,726 - $609,350	35%
$609,351+	37%

Self-Employment Tax

Social Security: 12.4% (up to $168,600 for 2024)
Medicare: 2.9% (no cap)
Additional Medicare: 0.9% (income over $200K single)
Total: 15.3% (+ 0.9% high income)
50% is deductible as adjustment to income

Capital Gains Tax (2024)

Rate	Single Income	MFJ Income
0%	Up to $47,025	Up to $94,050
15%	$47,026 - $518,900	$94,051 - $583,750
20%	Over $518,900	Over $583,750

Deduction Cheat Sheet

## Common Business Deductions

### Fully Deductible (100%)
- [ ] Advertising and marketing
- [ ] Bank fees and interest
- [ ] Business insurance
- [ ] Contract labor
- [ ] Education (business-related)
- [ ] Legal and professional fees
- [ ] Office supplies
- [ ] Rent (business property)
- [ ] Software and subscriptions
- [ ] Telephone and internet (business %)
- [ ] Travel (business purpose)

### Partially Deductible
- [ ] Meals (50%)
- [ ] Vehicle (business % or mileage)
- [ ] Home office (business % of home)
- [ ] Cell phone (business % of usage)
- [ ] Entertainment (0% - not deductible since 2018)

### Above-the-Line Deductions
- [ ] Self-employed health insurance (100%)
- [ ] SEP/SIMPLE/Solo 401k contributions
- [ ] 1/2 of self-employment tax
- [ ] Student loan interest (up to $2,500)
- [ ] HSA contributions

Best Practices

Year-Round

Track all expenses in real-time
Maintain separate business accounts
Save 25-30% for taxes
Make quarterly payments
Keep receipts (digital backup)

Annually

Review entity structure
Maximize retirement contributions
Implement year-end strategies
Reconcile 1099s received
File on time or extend

Documentation

Keep 7 years of records
Contemporaneous mileage log
Written home office policy
Detailed expense categorization
Contractor agreements on file

Integration with Other Skills

Use with budget-planner: Incorporate tax payments
Use with cash-flow-forecaster: Model tax payment timing
Use with financial-reporter: Tax provision reporting
Use with compliance-checker: Ensure tax compliance
Use with accounts-reconciler: Verify reported income

Common Pitfalls to Avoid

Missing estimated payments: Penalties add up quickly
Commingling funds: Keep business and personal separate
Ignoring state taxes: State rules differ significantly
Aggressive deductions: Red flags invite audits
Missing documentation: No receipt = no deduction
Late S-Corp election: Must file within 75 days
Incorrect contractor classification: Misclassification penalties are severe
Ignoring nexus issues: Multi-state operations create complexity

Disclaimer

This skill provides educational tax information only. Tax law is complex and varies by jurisdiction. Always:

Consult a qualified CPA or tax attorney for specific advice
Verify current tax rates and limits (they change annually)
Consider your complete financial picture
File accurately and on time