So how do We do a tax plan?
Heres’ a step by step guide on how to do the most common elements of a tax plan
Start your question list first! - Before you start working on a plan, grab a pad, a digital note or somewhere that you’ll flag your questions as you go. This may sound silly, but it will make sure you’ve captured everything, and give you a nice list for the client. Write every question down, then cross them off if you solve them along the way.
Identify income and expense sources - Before you begin, take a look at the 2023 returns and make your own list of what you expect to see. List out any W-2’s, investment accounts, unemployment, capital gains, biz income etc that you see on the returns, even if you aren’t sure if they’ll have it this year. Better to list it than to miss it.
Modify your list based on the survey responses - Here’s a Video walkthrough on the different questions clients will see, and what questions we should be asking based on their responses. (These are pretty much the same questions we did for 2022 for this upcoming year)
Capture your Carryovers - Look at the 2023 PDF return to capture overpayments applied from 2023 for fed and state, as well as NOL’s and capital loss carryovers
Clear out prior year carryovers - Because we’re copying the 2023 returns you may have items that carried forward into 2023 from 2022 that were used up or need to be adjusted. Check for NOL, Capital Loss and applied payments
Project your wage items - Use the latest paystub to project total wages. More Detail in a video here and a worksheet here.
Project your investment income - If no major changes noted on the survey, then project SALY, if they mention an adjustment, then capture it. There’s no need to get statements for most dividend/interest income, but if they provide them, make sure you take a look and see if it makes sense compared with last year.
Project Capital Gains - Get a realized gain and loss summary from the clients brokerage account. If they don’t provide, get them to give you a number for short term and long term separately so we can project it. Watch out as some clients are giving us statements for IRAs.
Project freelance or business income - Depends on what they provide, Quick video here.
Project your state adjustments - the PTET will be in a future step, but you need to identify any state adjustments that are already baked into the P&L. Notably NYS PTET, NYC GCT and UBT are not deductions for the calculation of those taxes or NYS taxable income.
Project retirement plan contributions - I put together a quick calculator to help you determine the max contributions, and to know the effect on wages and biz deductions, and a walkthrough video.
Project Pass Through Entity Tax Deductions - PTET Calculations should be done towards the end of the process, since they’re based on the final K-1 amounts. I created a calculator to help figure those out, and a walkthrough video on how to use it here.
Once you’ve projected all of those items and documented them in the 2024 planning folder, THEN you can enter them into the tax program.
S-corps and Partnerships - When in doubt, create a projection for the entity and let it pull in the K-1. This will make sure we’re not missing any UBT, GCT or local taxes at the biz level
Review the tax return and compare with your list of questions from the start - Make sure you entered all the things noted in your questions/carryovers from earlier, along with estimated tax payments and credits.
Figure out when the taxes need to be paid Not sure with the safe harbors? use this calculator