Tax Planning Course Useful for Advancing Enrolled Agent Services
A number of choices are available to meet enrolled agent continuing education requirements. Enrolled agents should consider this an opportunity to expand their knowledge in a special area. Doing so can result in becoming an expert in something that creates distinction for their professional services.
One such additional area of expertise is acquired in a tax planning course. A large number of taxpayers will rely upon enrolled agents for communication about tax issues before their returns are prepared. An enrolled agent tax practice that provides planning services stays busy year round. It also saves money for taxpayers by considering strategies and decisions that decrease future tax liability.
Whether a tax situation is simple or complex, tax planning serves a useful purpose. Here are some examples of planning strategies to consider before the year is finished.
One planning opportunity involves gift giving. Taxpayers with charitable intentions should plan for the optimal tax benefits of their donations. Spreading charitable giving among several years is usually best. Gifting some in December and more a few weeks later in January is often a sound approach.
Most importantly, IRS enrolled agents should point out to taxpayers the potential limit of tax deductible charitable giving. Tax-deductible donations are limited to a percentage of income. The excess is carried over but only for 5 years.
A tax planning strategy for business owners with minor children involves income-shifting possibilities. Employed children can earn money that’s tax-free is it is below the tax return filing requirement. It even escapes employment taxes for Social Security and Medicare. Parents provide money to their children and receive a business tax deduction. However, a legitimate working relationship must exist. Proprietors should document the hours and duties performed by the children as genuine employees.
Increasing retirement plan contributions is another tax planning measure covered in EA study. For working individuals, contributing a little more to a 401(k) can reduce the marginal tax bracket. The tax break from using the 401(k) thus provides much more of an advantage than merely saving the money from after-tax income.
Self-employed individuals should plan now to fund SEP-IRAs. This is especially true if they have no employees. In that case, all of the tax deduction is for money that still belongs to them in a retirement plan.
Some areas available for study in an enrolled agent class cover details relevant to owners of S corporations. These individuals need help understanding the effect of shareholder basis on their income tax calculation. For example, losses on S corporations are not deductible if they exceed shareholder basis. In fact, shareholder distributions in excess of basis become capital gain income when an S corporation owner normally expects the distributions to have no tax impact. Any capital loss carryforward can offset this effect.
Anyone with capital loss carryforward may benefit from tax planning. They could harvest investment gains by selling securities without incurring a tax consequence. The capital loss carryforwards are used to offset realized gains.
Awareness of tax planning opportunities can set apart an enrolled agent from other tax practices.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.