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

1. 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

1. 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
```

1. Reasonable Salary Determination
2. Industry standards for role
3. Geographic location factors
4. Experience and qualifications
5. Company profitability

6. IRS guidelines (typically 60-80% of net income initially)

7. Implementation Considerations

8. State filing requirements
9. Election timing (S-Corp: within 75 days of tax year)
10. Payroll setup requirements
11. Accounting complexity increase

12. Ongoing compliance costs

13. Recommendation

14. Recommended entity structure
15. Estimated annual tax savings
16. Implementation steps
17. Timing considerations
18. 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

1. Retirement Contributions

1. Health-Related Deductions
2. Self-employed health insurance deduction (100%)
3. HSA contributions ($4,150 individual / $8,300 family)

4. Long-term care insurance premiums (age-based limits)

5. Section 199A (QBI) Deduction

6. 20% of Qualified Business Income
7. Subject to income limits ($191,950 single / $383,900 MFJ)
8. SSTB limitations at high income
9. W-2 wage and property limitations

10. Optimal structuring strategies

11. Depreciation Strategies

12. Section 179 expensing ($1,220,000 limit)
13. Bonus depreciation (60% in 2024)
14. Standard depreciation schedules
15. Vehicles: $12,200 first year (+ bonus)

16. Listed property rules

17. Often Overlooked Deductions

18. State and local taxes (up to $10,000)
19. Charitable contributions
20. Student loan interest
21. Business use of cell phone
22. Business-related books/publications
23. Professional memberships
24. 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

1. Tax Liability Estimation
2. Federal income tax brackets
3. Self-employment tax
4. State income tax

5. Local taxes (if applicable)

6. Safe Harbor Calculation

7. 100% of prior year tax (110% if AGI > $150K)
8. OR 90% of current year tax

9. Choose method to minimize payments

10. 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 |

11. Cash Flow Optimization

12. Minimum required payments
13. Penalty avoidance strategies
14. Year-end catch-up options

15. Underpayment penalty calculation

16. Mid-Year Adjustments

17. Income variance analysis
18. Deduction timing strategies
19. Entity structure changes
20. 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

1. Income Deferral Strategies
2. Delay invoicing to next year
3. Defer receipt of payments
4. Installment sales treatment

5. Defer bonuses (employees)

6. Income Acceleration Strategies
   (When next year will be higher income)

7. Accelerate billing
8. Recognize deferred revenue
9. Roth conversions

10. Capital gain harvesting

11. Expense Acceleration

12. Prepay deductible expenses
13. Purchase equipment (Section 179)
14. Maximize retirement contributions
15. Pay Q1 state taxes in December

16. Stock up on supplies

17. Expense Deferral
    (When next year will be higher income)

18. Delay discretionary purchases
19. Postpone major repairs

20. Defer prepayments

21. Retirement Contribution Maximization

22. Calculate max contribution room
23. Deadline awareness:
    • 401k employee: December 31
    • SEP/401k employer: Tax filing deadline

24. Catch-up contributions (50+)

25. Capital Gains/Losses

26. Tax-loss harvesting
27. Long-term vs short-term optimization
28. Wash sale rules (30 days)

29. Charitable donation of appreciated assets

30. Charitable Giving Strategies

31. Bunching deductions
32. Donor-advised funds
33. Qualified Charitable Distributions (70.5+)
34. 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

1. Documentation Review
2. Income verification (1099s, bank statements)
3. Expense receipts and invoices
4. Mileage logs
5. Home office measurements
6. Asset purchase documentation

7. Contractor 1099s issued

8. Record Organization

9. Chronological expense files
10. Bank statement reconciliation
11. Credit card statement backup
12. Digital backup system

13. 7-year retention policy

14. Audit Defense Preparation

15. Understand audit types:
    • Correspondence audit (mail)
    • Office audit (IRS office)
    • Field audit (your location)
16. Know your rights

17. Representation options (CPA, EA, attorney)

18. Common Audit Issues

19. Mixed personal/business expenses
20. Insufficient documentation
21. Hobby loss rules
22. Contractor vs employee classification
23. Unreported income

Deliverable: Audit readiness checklist and documentation guide

Quick Reference

Tax Rate Reference (2024)

Federal Income Tax Brackets (Single)

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)

Deduction Cheat Sheet

## 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