IRS Tax CheckNow that 2016 tax season is over, at least for most of our clients, we have a few moments of free time to eat, sleep, and reflect on our busiest year ever – thank you! We filed more returns, and also more extensions, thanks to later deadlines for required tax documentation. The Affordable Care Act caused some confusion by requiring proof of healthcare coverage. Overall, everything seemed a little more complex, from basic returns to foreign income exclusions from war-torn countries.

Through struggle comes success

Through all of this, we helped a number of clients save and recover a substantial amount of taxes, allowing them to keep more of their hard-earned income. These success stories make us smile and confirm why we’re in the accounting business. Here are six of our favorite 2016 success stories.

$5,200 IRA contribution yields $3,000 in tax savings. It’s not often that a client can fund his own retirement account and get a 66% tax savings. In this situation, the adjustment in earnings reduced his tax bracket and allowed him to take advantage of both higher education and low income housing tax credits – a terrific tax trifecta.

Client saves $110,000 of capital gains taxes. While this client is in a very high income bracket, other clients have benefited from this same 2015 election. Without getting too complicated, people who have large capital gains along with investment interest can use that interest expense to offset the gains, and potentially other income as well. As we like to say, don’t forget to elect!

$60,000 ad valorem tax recovery. Many small business owners take advantage of the Freeport Exemption to eliminate ad valorem tax for out of state sales. We verify calculations, and the government does make mistakes. It takes an experienced CPA to cite the specific Georgia Code that allows corrections to previous tax returns. For this particular business, Fulton county just approved a $60,000 recovery from 2012-2013.

$25,000 land conservation contribution yields substantial tax savings. This requires some excess cash, but conservation land donations offer great tax incentives while protecting our natural resources. We’re neutral and unbiased advisors, so we won’t sell investment products like this, but we can recommend companies that assemble these land trust partnerships.

$20,000 of income freed up. One of our clients was wondering why she made a very comfortable living, but continued to have cash flow issues. The problem was that her company was withholding nearly $30,000 for Georgia state taxes, almost four times more than what was needed. We helped her adjust her state withholding, stopped giving Georgia an interest-free loan, and freed up cash flow.

$9,000 of late filing penalties waived. For business partnerships, the IRS charges a steep, per-partner penalty for not filing tax returns on time. This includes even “information returns” where no payment is required.  The IRS normally waives penalties for the first violation, but for habitually late filers there’s a 25-year-old Code that can be referenced to waive penalties every year. You just need to know the Code.

Please contact us if you would like more detail on any of these success stories.

Don’t skimp on your tax prep

We run a conservative practice, always offering sound financial advice and never advocating risky tax tricks or gimmicks. These are 2016 success stories, but the work behind them is based on over 100 years of combined tax experience. These tax saving ideas won’t necessarily pop up in a TurboTax interview, and require more experience than that kid down the “Block” may have. Ensure you’re making the right tax decisions. Get a CPA involved in your tax preparation, even if it’s just to double check your returns before you file.

Neal Bach, CPA