Tax Planning

Tax Return Review

Our tax planning process begins by reviewing previously filed tax returns. This critical step informs us about how clients receive their income, deductions they take, retirement account activity, charitable intent, current year safe harbor, etc. For existing clients, this step also confirms that strategies implemented during the previous year were reported correctly. 

Transaction Tax Analysis

Throughout the year, many clients will have questions about how certain events or activities affect their taxes. Sometimes this is as simple as projecting the current year income. Other transactions we will model frequently for clients include:

Roth Conversions: Opportunistic roth conversions can help shift assets into a tax free account and reduce future Required Minimum Distributions from a traditional IRA.

Safe Harbor Compliance & Estimated Payments: We help clients make sure they are in compliance with their safe harbor and help them with their estimated payments.

Business & Real Estate Transactions, Recapitalizations, & Dispositions: We will help model the tax consequences of various business or real estate transactions so that clients can understand the differences between different alternatives.

Disposition of Equity Compensation or Concentrated Positions: Restricted Stock Units (RSUs) and stock options have unique tax considerations and elections that can help optimize the after-tax proceeds of the award.

Net Unrealized Appreciation (NUA) Distributions: Employees who own company stock in their 401(k) plan have a unique opportunity to distribute that stock in a tax efficient manner upon separating from service.

Personal Tax Return Preparation

For select clients, we will prepare their personal tax returns. This includes Form 1040 and related schedules, as well as associated state fillings. This also may include other relevant tax forms. This service is offered on a case-by-case basis subject to our discretion.

Tax Deferral Strategies

Clients involved in business or real estate transactions will often consider strategies to defer all or some portion of their realized capital gain. These techniques will often include:

Qualified Opportunity Funds: Qualified Opportunity Funds (QOFs) that invest in Qualified Opportunity Zones present an opportunity for a temporary deferral of capital gains, as well as the potential exclusion of capital gains from the QOF investment itself.

1031/721 (UPREIT) Exchanges Using Delaware Statutory Trusts (DSTs): Real estate investors who want to continue deferring taxes, but who no longer want to deal with the day-to-day management of direct ownership of real estate, can utilize a 1031/721 (UPREIT) exchange via a DST to defer capital gains into a private REIT.

1202 Planning: Leveraging Section 1202 of the IRS Code to maximize Qualified Small Business Stock (QSBS) treatment to avoid capital gains tax.

Cash flow & Required Minimum Distribution (RMD) planning

It is not uncommon for clients to have taxable income that is significantly higher than their annual cash flow, especially if they have large amounts of work-related equity compensation. Additionally, clients with very large qualified accounts like IRAs may be required to take large distributions from these accounts based up on their age. We will often model a client’s cash flow and taxable income over a multi-year period to help reduce the cumulative impact of taxes paid over time.

Charitable Giving Strategies

Many of our clients enjoy financially supporting their favorite charitable organizations, academic institutions, and places of worship. We help clients understand the deductibility of these contributions, as well as limits the IRS may place on them. Strategies for maximizing the tax benefits of our clients’ generosity can include:

Bunching Strategies: It may make sense for clients who take the standard deduction to bunch charitable contributions into one year.

Appreciated Securities: Gifting appreciated securities can offer the benefit of potential deductibility, as well as the avoidance of capital gains in the future.

Qualified Charitable Distributions (QCDs): Clients who are over the age of 70½ can contribute up to $100,000 per year directly to nonprofit institutions from their Individual Retirement Accounts (IRAs).

Donor Advised Funds/Family Foundations: Donor advised funds and family foundations can be used to make charitable gifts that are deducted in one year, but granted to charitable beneficiaries over a period of time.

Wealth Transfer Including Trust, Estate Tax, and Gift Tax Planning

While they’re not mutually exclusive, clients generally want to plan for the tax regime that could adversely affect them the most. For clients who have potential exposure to transfer taxes like the estate tax or generation skipping tax, we offer estate planning and gift planning strategies to help transfer assets to heirs as efficiently as possible.

Legislative Updates

Whether it’s Baird’s own team at Strategas or independent third-parties like Evercore ISI, we have access to the top research analysts covering tax policy and other legislative policy in the country. We will provide clients updates on policy issues that could affect them through our newsletter, through our website and through in-person events.

Asset Location Analysis

Some investments produce income that may have certain tax benefits like qualified dividend treatment or depreciation expense. Some investments may also qualify for tax credits. Additionally, some types of accounts offer tax deferral opportunities or tax-free distributions. It’s important to make sure that the right assets are placed the right accounts to generate the optimal after-tax return.