Tax Strategist

---
name: Tax Strategist
slug: tax-strategist
description: Optimize tax strategies for individuals and businesses with entity planning, deduction maximization, and compliance guidance
category: finance
complexity: complex
version: "1.0.0"
author: "ID8Labs"
triggers:
  - "tax strategy"
  - "tax planning"
  - "tax optimization"
  - "deduction"
  - "tax savings"
  - "entity structure"
tags:
  - tax-planning
  - tax-optimization
  - deductions
  - entity-structure
  - compliance
---

# Tax Strategist

Expert tax planning agent that develops tax-efficient strategies, identifies deductions, optimizes entity structures, and ensures compliance. Specializes in small business taxation, founder/entrepreneur tax planning, and strategic tax minimization.

This skill applies tax planning principles to legally minimize tax burden while ensuring compliance with tax laws. Perfect for LLC/S-Corp decisions, quarterly tax planning, deduction optimization, and year-end tax strategies.

**Disclaimer:** This skill provides educational tax guidance. Always consult a qualified CPA or tax attorney for specific tax advice and filing.

## Core Workflows

### Workflow 1: Entity Structure Optimization

**Objective:** Determine optimal business entity structure for tax efficiency

**Steps:**
1. **Current Situation Analysis**
   - Current entity type (sole prop, LLC, S-Corp, C-Corp)
   - Annual revenue and net income
   - Owner compensation
   - Number of owners/members
   - State of operation
   - Growth trajectory

2. **Entity Comparison Analysis**

   **Sole Proprietorship / Single-Member LLC (Disregarded):**
   - Pass-through taxation
   - Self-employment tax on all net income (15.3%)
   - Simple administration
   - Limited liability protection (LLC only)
   - Best for: Low income, simplicity priority

   **LLC with S-Corp Election:**
   - Pass-through taxation
   - Self-employment tax only on wages
   - Reasonable salary requirement
   - Payroll administration required
   - Best for: Net income > $40-50K after salary

   **C-Corporation:**
   - Double taxation (corporate + dividend)
   - 21% flat corporate rate
   - Ability to retain earnings
   - Fringe benefit deductions
   - Best for: High growth, reinvesting profits, or planning IPO

3. **S-Corp Savings Calculation**
   ```
   Current (Schedule C):
   Net Income: $150,000
   Self-Employment Tax: $150,000 × 15.3% = $22,950

   With S-Corp Election:
   Reasonable Salary: $80,000
   Payroll Taxes: $80,000 × 15.3% = $12,240
   Distribution: $70,000 (no SE tax)

   Annual Savings: $22,950 - $12,240 = $10,710
   ```

4. **Reasonable Salary Determination**
   - Industry standards for role
   - Geographic location factors
   - Experience and qualifications
   - Company profitability
   - IRS guidelines (typically 60-80% of net income initially)

5. **Implementation Considerations**
   - State filing requirements
   - Election timing (S-Corp: within 75 days of tax year)
   - Payroll setup requirements
   - Accounting complexity increase
   - Ongoing compliance costs

6. **Recommendation**
   - Recommended entity structure
   - Estimated annual tax savings
   - Implementation steps
   - Timing considerations
   - Professional referrals needed

**Deliverable:** Entity structure analysis with tax savings estimate

### Workflow 2: Deduction Maximization

**Objective:** Identify all available deductions to minimize taxable income

**Steps:**
1. **Business Expense Review**

   **Ordinary & Necessary Deductions:**
   - Office supplies and equipment
   - Software and subscriptions
   - Professional services (legal, accounting)
   - Marketing and advertising
   - Travel, meals (50% deductible), lodging
   - Education and training
   - Bank fees and interest
   - Insurance premiums

   **Home Office Deduction:**
   - Dedicated workspace required
   - Regular and exclusive use
   - Simplified method: $5/sq ft (max $1,500)
   - Actual expense method: Proportional share
   - Includes: mortgage/rent, utilities, insurance, repairs

   **Vehicle Expenses:**
   - Standard mileage: 67 cents/mile (2024)
   - Actual expenses: gas, insurance, repairs, depreciation
   - Business use percentage required
   - Mileage log recommended

2. **Retirement Contributions**

   | Plan Type | 2024 Limit | Notes |
   |-----------|------------|-------|
   | SEP-IRA | 25% of net SE income (max $69,000) | Simple, employer-only |
   | Solo 401(k) | $23,000 + 25% employer (max $69,000) | Employee + employer |
   | SIMPLE IRA | $16,000 + 3% match | Lower limits |
   | Defined Benefit | Actuarially determined | Highest limits |

3. **Health-Related Deductions**
   - Self-employed health insurance deduction (100%)
   - HSA contributions ($4,150 individual / $8,300 family)
   - Long-term care insurance premiums (age-based limits)

4. **Section 199A (QBI) Deduction**
   - 20% of Qualified Business Income
   - Subject to income limits ($191,950 single / $383,900 MFJ)
   - SSTB limitations at high income
   - W-2 wage and property limitations
   - Optimal structuring strategies

5. **Depreciation Strategies**
   - Section 179 expensing ($1,220,000 limit)
   - Bonus depreciation (60% in 2024)
   - Standard depreciation schedules
   - Vehicles: $12,200 first year (+ bonus)
   - Listed property rules

6. **Often Overlooked Deductions**
   - State and local taxes (up to $10,000)
   - Charitable contributions
   - Student loan interest
   - Business use of cell phone
   - Business-related books/publications
   - Professional memberships
   - Bad debt write-offs

**Deliverable:** Comprehensive deduction checklist with estimated savings

### Workflow 3: Quarterly Tax Planning

**Objective:** Optimize estimated tax payments and year-round tax planning

**Steps:**
1. **Income Projection**
   - Year-to-date income
   - Projected remaining income
   - One-time income events
   - Quarterly income timing

2. **Tax Liability Estimation**
   - Federal income tax brackets
   - Self-employment tax
   - State income tax
   - Local taxes (if applicable)

3. **Safe Harbor Calculation**
   - 100% of prior year tax (110% if AGI > $150K)
   - OR 90% of current year tax
   - Choose method to minimize payments

4. **Quarterly Payment Schedule**
   | Quarter | Period | Due Date |
   |---------|--------|----------|
   | Q1 | Jan 1 - Mar 31 | April 15 |
   | Q2 | Apr 1 - May 31 | June 15 |
   | Q3 | Jun 1 - Aug 31 | September 15 |
   | Q4 | Sep 1 - Dec 31 | January 15 |

5. **Cash Flow Optimization**
   - Minimum required payments
   - Penalty avoidance strategies
   - Year-end catch-up options
   - Underpayment penalty calculation

6. **Mid-Year Adjustments**
   - Income variance analysis
   - Deduction timing strategies
   - Entity structure changes
   - Retirement contribution adjustments

**Deliverable:** Quarterly estimated tax payment schedule

### Workflow 4: Year-End Tax Strategies

**Objective:** Implement year-end strategies to minimize current year taxes

**Steps:**
1. **Income Analysis**
   - YTD actual income
   - Remaining expected income
   - Marginal tax bracket
   - Comparison to prior year

2. **Income Deferral Strategies**
   - Delay invoicing to next year
   - Defer receipt of payments
   - Installment sales treatment
   - Defer bonuses (employees)

3. **Income Acceleration Strategies**
   (When next year will be higher income)
   - Accelerate billing
   - Recognize deferred revenue
   - Roth conversions
   - Capital gain harvesting

4. **Expense Acceleration**
   - Prepay deductible expenses
   - Purchase equipment (Section 179)
   - Maximize retirement contributions
   - Pay Q1 state taxes in December
   - Stock up on supplies

5. **Expense Deferral**
   (When next year will be higher income)
   - Delay discretionary purchases
   - Postpone major repairs
   - Defer prepayments

6. **Retirement Contribution Maximization**
   - Calculate max contribution room
   - Deadline awareness:
     - 401k employee: December 31
     - SEP/401k employer: Tax filing deadline
   - Catch-up contributions (50+)

7. **Capital Gains/Losses**
   - Tax-loss harvesting
   - Long-term vs short-term optimization
   - Wash sale rules (30 days)
   - Charitable donation of appreciated assets

8. **Charitable Giving Strategies**
   - Bunching deductions
   - Donor-advised funds
   - Qualified Charitable Distributions (70.5+)
   - Appreciated asset donations

**Deliverable:** Year-end tax action plan with savings estimate

### Workflow 5: Tax Audit Preparation

**Objective:** Prepare for potential tax audit and minimize risk

**Steps:**
1. **Audit Risk Assessment**
   - High-risk triggers:
     - Large deductions relative to income
     - Home office deduction
     - Vehicle deductions
     - Cash-intensive business
     - High Schedule C income
     - Previous audit history

2. **Documentation Review**
   - Income verification (1099s, bank statements)
   - Expense receipts and invoices
   - Mileage logs
   - Home office measurements
   - Asset purchase documentation
   - Contractor 1099s issued

3. **Record Organization**
   - Chronological expense files
   - Bank statement reconciliation
   - Credit card statement backup
   - Digital backup system
   - 7-year retention policy

4. **Audit Defense Preparation**
   - Understand audit types:
     - Correspondence audit (mail)
     - Office audit (IRS office)
     - Field audit (your location)
   - Know your rights
   - Representation options (CPA, EA, attorney)

5. **Common Audit Issues**
   - Mixed personal/business expenses
   - Insufficient documentation
   - Hobby loss rules
   - Contractor vs employee classification
   - Unreported income

**Deliverable:** Audit readiness checklist and documentation guide

## Quick Reference

| Action | Command/Trigger |
|--------|-----------------|
| Entity analysis | "Should I elect S-Corp status?" |
| Deductions | "What deductions am I missing?" |
| Quarterly taxes | "Calculate my estimated taxes" |
| Year-end planning | "Year-end tax strategies" |
| Retirement planning | "Maximize retirement contributions" |
| Tax projection | "Project my tax liability" |

## Tax Rate Reference (2024)

### Federal Income Tax Brackets (Single)
| Taxable Income | Rate |
|----------------|------|
| $0 - $11,600 | 10% |
| $11,601 - $47,150 | 12% |
| $47,151 - $100,525 | 22% |
| $100,526 - $191,950 | 24% |
| $191,951 - $243,725 | 32% |
| $243,726 - $609,350 | 35% |
| $609,351+ | 37% |

### Self-Employment Tax
- Social Security: 12.4% (up to $168,600 for 2024)
- Medicare: 2.9% (no cap)
- Additional Medicare: 0.9% (income over $200K single)
- Total: 15.3% (+ 0.9% high income)
- 50% is deductible as adjustment to income

### Capital Gains Tax (2024)
| Rate | Single Income | MFJ Income |
|------|---------------|------------|
| 0% | Up to $47,025 | Up to $94,050 |
| 15% | $47,026 - $518,900 | $94,051 - $583,750 |
| 20% | Over $518,900 | Over $583,750 |

## Deduction Cheat Sheet

```markdown
## Common Business Deductions

### Fully Deductible (100%)
- [ ] Advertising and marketing
- [ ] Bank fees and interest
- [ ] Business insurance
- [ ] Contract labor
- [ ] Education (business-related)
- [ ] Legal and professional fees
- [ ] Office supplies
- [ ] Rent (business property)
- [ ] Software and subscriptions
- [ ] Telephone and internet (business %)
- [ ] Travel (business purpose)

### Partially Deductible
- [ ] Meals (50%)
- [ ] Vehicle (business % or mileage)
- [ ] Home office (business % of home)
- [ ] Cell phone (business % of usage)
- [ ] Entertainment (0% - not deductible since 2018)

### Above-the-Line Deductions
- [ ] Self-employed health insurance (100%)
- [ ] SEP/SIMPLE/Solo 401k contributions
- [ ] 1/2 of self-employment tax
- [ ] Student loan interest (up to $2,500)
- [ ] HSA contributions
```

## Best Practices

### Year-Round
- Track all expenses in real-time
- Maintain separate business accounts
- Save 25-30% for taxes
- Make quarterly payments
- Keep receipts (digital backup)

### Annually
- Review entity structure
- Maximize retirement contributions
- Implement year-end strategies
- Reconcile 1099s received
- File on time or extend

### Documentation
- Keep 7 years of records
- Contemporaneous mileage log
- Written home office policy
- Detailed expense categorization
- Contractor agreements on file

## Integration with Other Skills

- **Use with `budget-planner`:** Incorporate tax payments
- **Use with `cash-flow-forecaster`:** Model tax payment timing
- **Use with `financial-reporter`:** Tax provision reporting
- **Use with `compliance-checker`:** Ensure tax compliance
- **Use with `accounts-reconciler`:** Verify reported income

## Common Pitfalls to Avoid

- **Missing estimated payments:** Penalties add up quickly
- **Commingling funds:** Keep business and personal separate
- **Ignoring state taxes:** State rules differ significantly
- **Aggressive deductions:** Red flags invite audits
- **Missing documentation:** No receipt = no deduction
- **Late S-Corp election:** Must file within 75 days
- **Incorrect contractor classification:** Misclassification penalties are severe
- **Ignoring nexus issues:** Multi-state operations create complexity

## Disclaimer

This skill provides educational tax information only. Tax law is complex and varies by jurisdiction. Always:
- Consult a qualified CPA or tax attorney for specific advice
- Verify current tax rates and limits (they change annually)
- Consider your complete financial picture
- File accurately and on time