With tax season near, many are already descending into doom and gloom associated with the event. But what if there was a better way, one that could save people money, ease their tax burden, and begin building secure assets? According to Steve Moskowitz, San Francisco tax attorney and founder of Moskowitz LLP, there is a simple way that business owners can avoid March Tax Madness this year.
Most individuals and savvy business owners have some sort of simple retirement plan set up. These tax-deferred accounts allow one to realize immediate tax deductions up to the full amount of their contribution. The most common tax-deferred retirement accounts in the United States are traditional IRAs and 401(k) plans. However, many business owners are regrettably unaware that there are over 20 different kinds of retirement vehicles- many with limits much higher than a traditional IRA or 401K. Because a business can have multiple plans at the same time, the right combination allows businesses to realize tremendous tax and cash flow benefits and asset protection with a low cost to implement. The government even provides tax credits for implementation!
The immediate advantage of paying less tax in the current year provides a strong incentive for many individuals to fund their tax-deferred accounts. Thus, by putting money into these types of accounts, business owners can pay less on their 2020 taxes while simultaneously building towards their future. This is because EVEN THOUGH THEY FORM AND CONTRIBUTE INTO THE PLAN(S) IN 2021, THEY STILL GET A TAX DEDUCTION FOR THEIR 2020 TAXES! These types of contributions are an exception to the rule that a deduction for 2020 must be paid in 2020. Many types of retirement plans can be formed, and contributions can be made as late as the due date of the tax return including extension, or, in other words, they have about ¾ of the way into 2021 to form and contribute to a pension yet the business can elect to deduct it from its 2020 income tax return.
Sounds too good to be true? According to Moskowitz, this is entirely legal and is even encouraged by the government. Moskowitz offers an example, 'If you otherwise qualify, suppose you are in the top Federal and State tax bracket, and you owe $100,000 in tax; you can either pay that full $100,000 or you could put $200,000 into a pension and save $100,000 in taxes. The question is, ‘Would you prefer to decrease your taxes and have a secure asset or increase your taxes and have an insecure asset?' Because the taxpayer has put their funds into a qualifying retirement account, the taxpayer realizes an immediate tax deduction. Further, these types of accounts have special protection under the law and they cannot be seized by a creditor with a judgment against them, even if they have to file bankruptcy.
Moskowitz recognizes that not everyone can begin contributing to a plan at this time due to cash flow. There are still plenty of options for those individuals as well. 'Suppose you realize you owe more in taxes than you had planned for and are able to pay. This can be a stressful and dismal realization for most. However, consider simply putting your return on an extension and utilizing the additional time to file your tax return to begin funding a pension instead of paying those taxes. Moskowitz is quick to point out that an extension is not a deferment of payment of the taxes, but an extension for filing of the income tax return. Thus, if the business or individual would have owed 2020 taxes, but the funding of a pension plan reduces or eliminates the tax, they would have reduced or eliminated the payment due with the filing extension.
These tax laws apply to businesses of any size. Small businesses are often left drowning in taxes while the larger corporations pay virtually nothing in taxes. 'That is simply because they have a team of tax lawyers and accountants working for them to provide solutions just like this, says Moskowitz. However, with the right strategy, any qualifying business can benefit from the power of the right retirement plan(s) strategy.
With more than 30 years of experience as a tax attorney leading a tax law firm, Steve Moskowitz has dedicated himself to helping individuals and business owners navigate taxes and achieve optimal outcomes. He graduated from Drexel University and later New York University where he obtained a Bachelor's and Master's Degree in Accounting. He then went on to graduate from New York Law School to become an attorney and then graduated from Golden Gate School of Law where he obtained a law degree in tax law, and also taught tax and accounting. Steve is an active member of the California Bar and an inactive member of the New York Bar and an inactive New York CPA. Steve is admitted in the United States Supreme Court and the Federal and State Courts in California as well as admitted to the United States Tax Court.
He founded Moskowitz LLP, a tax law firm, when he realized that not every individual or business owner had an internal revenue code on their bookshelf at home. He witnessed large corporations utilizing tax law to their advantage but saw that individuals and small businesses failed to do the same. In addition to currently practicing tax law for over 30 years, with 30 years on radio, 17 years on television, and a decade spent teaching, Moskowitz is a subject matter expert at taking complex tax situations and making them understandable to the general public. He is devoted to educating his clients and equipping them with the knowledge they need to resolve a variety of tax matters and ultimately, pay the least amount of tax that is legally possible.
Company Name: Moskowitz LLP
Contact Person: Steve Moskowitz
Email: Send Email
Address: One Market Street, Spear Tower, 36th Floor
City: San Francisco
Country: United States
Legal Disclaimer: MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.