Tax-Smart 2nd Opinions

When your clients and prospects sit down with their CPA or tax preparer each year, the taxes are being looked at retrospectively. How can your clients become prepared to take income from their IRAs or eventually having to withdraw their required minimum distributions while paying the least amount of tax as possible? Before a client receives a Tax Smart Second Opinion, they may not have done any tax planning in the past.

What is a Tax-Smart Second Opinion?

In order to look forward to the future of a client’s potential tax obligations and savings, a tax what-if must be completed. A CPA/EA takes a copy of the client or prospects last year’s tax return and completes an alternative version of the return. Second Opinions show the alteration of things such as how or when clients withdraw money from IRAs, start drawing social security, take their dividends, buy and sell investments, buy or sell a house and so much more. The goal is to show the client the difference of the tax burden they were responsible for last year, and how alternative planning could have potentially saved them tax money. As the client or prospect begins to understand that there was in fact room to do things a little differently, it is the producers goal to move the client or prospect into the tax planning portion of the firm. When the client or prospect commits to creating a tax plan with their financial planner, they begin to sew up any loose strings in their financial future. One of the many CPAS in the Paragon Network, or the CPA we have assisted in partnering the producer up with, will complete a Tax Smart Second Opinion. They dive into a myriad of projections to pair with the financial plans. Was withdrawing that money from the IRA the best option, or would there have been a lower tax burden to sell off a stock based investment?  Is your client or prospect drawing social security before retirement age and making income above the annual limit? For 2016, if you are under full retirement age for the entire year, the administration will deduct $1 for every $2 you earn above the annual limit of $15,720. Is your client or prospect making money, but having to turn right around and pay it back? What is the longer term goal for living off of and utilizing their IRA accounts? By the time a client reaches 70 ½, all RMD planning is out the door. Can you save your client tens of thousands of tax dollars by planning the IRA withdrawals between age 60 and 70? The Tax Smart Second Opinion will show you and your clients or prospects what money they are leaving on the table, what options they have to reduce their taxable responsibilities, and which investments best help them accomplish their tax planning goals.

Planning From A Tax-Smart Perspective

Paragon offers Tax-Smart 2nd Opinion planning services to all contracted downline advisors. To plan from a Tax-Smart perspective, a Tax-Smart 2nd Opinion is actively utilized in the financial planning process. To make decisions that are investment based, whether through life insurance, annuities, or securities based accounts, potential tax repercussions must be observed. The Tax-Smart Perspective process is utilizing the RMD plans, 10 year tax projection, Tax What-If’s and additional Tax-Smart 2nd Opinion documents as the basis of running illustrations for products to meet clients goals. Our belief is that we cannot suggest a product to a client without having the tax plan as a supporting document. If a client is going to defer taxes, or invest based on the goal of tax free income, tax brackets and RMD plans are required for an accurate final plan. At Paragon, Planning From A Tax-Smart Perspective is the only way to run a tax based financial planning firm.