This document discusses various tax planning strategies and scenarios to consider for the 2018 tax year. It recommends analyzing how decisions may impact your tax liability throughout the year using "what if" scenarios. Key areas to test include changes in income from jobs, investments, or a business. Tactics like deferring income, accelerating expenses, retirement contributions, and entity structure can help minimize taxes. The best strategy may not maximize tax savings but should align with your long-term goals. Comprehensive planning is advised to estimate taxes accurately and avoid penalties.

1. What If?
2018 Tax Planning

2. What if
 The what if analysis is designed to help you decide how decisions you
make affect your tax liability
 To get the most of tax planning, it is best you do it throughout the year
 While doing tax planning, it is important to remember the best tax
situation might not be best for your long term goals.
 Considering effect of taxes is good, but should not be done in isolation

3. Gross Income
 This section deals with changes in wages
 You might be offered a part time job paying $1,500 over the Christmas break.
 What if that $1,500 puts you over the threshold for claiming credits you could
otherwise qualify for?
 That $1,500 could end up costing you $3,200
 This is one situation where letting go of the part time job is a good idea.

4. Dividends and interests
 Dividend and interest planning is one that mostly affects retired
individuals.
 If most of your income comes from investments then it is important to
estimate your taxes correctly. If not you will pay unnecessary penalties.
 If your effective tax rate is above 20%, you will want to plan that most of
your taxable income comes from qualified dividends and capital gains.
 These are capped at 20% as opposed to 37% for ordinary income.
 Its all about structuring your investments, so you have the right type of
income.

5. Business income
 In this section, test how increase or decreases in income will affect your tax
liabilities.
 It might be in your best interest to defer income if a higher income cost you
credits and deductions you will otherwise qualify for.
 By defer income, I don’t mean hold cash you have received and claim it as income in
the following year
 This strategy is called tax fraud
 You can legally defer income by completing and invoicing jobs started this year, in
the next tax year. This works out if you are already at the end of the year
 Give your business a Christmas break. Let your customers know that your business
will be operating on very limited capacity till the holidays are over
 Use a retirement account to defer income. By having a retirement account for your
business, you can put excess earnings in there, and this would not be taxed till
retirement.

6. Business income cont.
 You can also speed up expenses:
 Rather than depreciating your asset purchases over time, section 179 of the tax
code allows you take the expenses all in one tax year.
 This is recommended if you are trying to reduce net income
 Stock up on supplies
 Buy things which you will buy anyway.
 Do not make frivolous purchases
 Spread the love
 Give bonuses to your employees

7. S corp or schedule c
 You can also test to see if your business will benefit tax wise if it was a S
corporation
 As a S corporation you must pay yourself a salary
 All benefits will be paid by the business
 Health insurance
 Retirement
 However, there is more paperwork requirements.
 If the tax savings are not huge, I recommend you stay a schedule c taxpayer.
 If you work for a network group and the group insists that payments are made
directly to you, then using a s corporation will not be beneficial to you.
 All payments have to be reported on your tax return with the tax id that the
payment was issued under.

8. S corp or C Corp
 You can also test to see if your business will benefit tax wise if it was a C
corporation
 Tax rates was lowered for c corporation to 21% this year
 At higher personal tax rates, the c corporation may be better
 On the other hand if you are a c corporation, you may want to test if the new
business deduction (QBI) will lower your tax liability.

9. Partnership or S Corp
 You can also test to see if your business will benefit tax wise if it was a S
corporation
 You might benefit from not paying self employment taxes on all income.

10. Other tests
 Capital gain
 Test how selling your assets ( e.g. stock) will affect you
 Other income
 Test how other income like unemployment insurance affects you
 Retirement contributions
 Roth versus IRA
 Standard or itemized deduction
 Should your itemize or use the standard deduction
 Child care expenses
 Should your wife work less and take care of the kids
 Health insurance responsibility payments
 What if you went without health insurance for one month or more
 Increased withholdings
 What if you withheld more from your paychecks