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"Fred's tremendous knowledge and commitment to service have greatly benefitted our company. He's corrected grave errors made by previous CPAs saving us tens of thousands of dollars. And he calmly navigated our way through a no change audit with the IRS. He has helped to transform us from a business that reacts to one that makes strategic decisions."

Tambi Harwood
Harwood Construction
Redwood City, CA

Tax Reduction Strategies

Are you a business owner or an individual with complex financial concerns? Are you frustrated with paying too much in taxes, with the uncertainty of complex and ever changing tax laws?

You are not alone.

First I would like to talk about the need for tax planning in general. Then I will talk about our specific tax planning services - Cyclical Tax Planning and Tax Planning for Specific Transactions.

These days one of the biggest challenges facing individuals and business owners in meeting their financial goals is dealing with taxes-how to comply with all the tax filing requirements, how to minimize taxes, and how to protect against tax audits. Tax laws are complex and constantly changing.

Anyone may so arrange his affairs that his taxes shall be as low as possible. He is not bound to choose that pattern which best pays the Treasury. Everyone does it, rich and poor alike, and all do right. For nobody owes any public duty to pay more than the law demands. Judge Learned Hand(1872-1961)

We are experts on taxes and are here to help you navigate through the maze. We stay alert to tax saving opportunities and believe in saving taxes through planning so you know what your tax obligations are before you prepare your income tax returns. Tax planning allows you to take advantage of tax saving opportunities before you get to the end of the year. We can help you structure transactions so they are not taxed at all or are taxed at the lowest rates. Waiting until after the end of the year, when you prepare your tax returns, may be too late.

Tax laws are not only written to raise revenue for the government, but they are also written to change our behavior. Tax laws encourage and discourage our behavior by using a carrot and stick approach. Some activities are taxed at high rates; some activities are not taxed at all or are taxed at lower rates. Some expenses are tax deductible; some expenses are not tax deductible.

Tax planning is the process of structuring economic activities so that they fall within the most favorable tax rules and thereby either eliminate or reduce taxes.

For example, if you pay for lunch for yourself and a friend this is generally considered a personal living expense and is not tax deductible; however, if you happen to be in business and take this friend to lunch to discuss business and properly document the business lunch this becomes a business lunch and is tax deductible. Same friend, same food, same price, but in the first instance the meal is a personal living expense and not tax deductible, but in the second instance the meal is a bona fide business expense and is tax deductible. The difference is knowing the rules and knowing how to document and arrange your activities so that they fall within the tax rules which are most favorable to you. For other examples of tax saving strategies see Case Studies.

I am not advocating that you evade income taxes; that is illegal and can result in severe penalties and possible jail time. However, what I am advocating is avoiding taxes-avoiding taxes by knowing the rules and, to paraphrase Judge Learned Hand, so arrange your affairs so that your taxes shall be as low as possible.

We can help you reduce taxes through our tax planning services.

Tax Services

For those in business or individuals with complex financial transactions we recommend tax planning done each year before the end of the year so you can develop tax saving strategies and stay in control of your tax situation. You save taxes by taking preventive action before the end of the year. Prevention is the key.

About three months before the end of your tax year we assess your tax situation. We analyze the taxable income and deductions which have taken place to date. Then we estimate the taxable income and deductions which you anticipate will take place during the rest of the year. We ask you about your financial goals and unusual events which you anticipate and that have an impact on your tax situation. We then compile all of this information and analyze your anticipated tax situation. In addition, we develop tax saving strategies which will allow you to achieve your financial goals and also save taxes. We provide comprehensive reports and show you the steps you need to take to implement the tax saving strategies.

Are you planning a major financial transaction? Such as buying or selling a business or investment property. How you arrange the transaction can make a difference in your taxes.

For instance, say you're tired of the rental property that you have had for years and want something different. If you sell the property with an all cash sale you will pay tax on the increase in value over the years you have owned the property. However, if you exchange the property for another like-kind investment property you will pay no tax when you sell the property. This is known as a like-king exchange in the tax rules.

Another example! Are you in business or thinking of going into business? Most people start business as a sole proprietorship, the so-called default form of business. But there are other forms of doing business which may allow you to reduce your taxes or get tax free benefits from your business. For instance, if you are self employed, your medical expenses (including medical insurance) are considered a personal living expenses and only deductible if you itemize deductions, and even if you itemize deductions, you usually are not allowed to deduct the full amount. If you incorporate your business, you can pay all of your medical expenses as a tax free fringe benefit. This is just one example of how, by choosing the best form of business organization, you can reduce your taxes. Other forms of business organization include: Subchapter S corporation, Limited Liability Corporation; Limited liability Partnership; General Partnership; Limited Partnership; and Trust.

We can help you identify and implement tax saving strategies. We identify your goals, analyze the tax situation and look for alternative ways of arranging things to reduce or eliminate taxes.

We also can help you determine the best form of organization for your business.

It is important to act before the end of the year or before that major financial transaction. I invite you to Contact me for more details or to set up a time for your FREE ORIENTATION SESSION.

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Frederick A. Thompson, CPA an Accountancy Corporation
(650) 343-5965 • email:
1200 Dore Avenue, Suite 202, San Mateo, California 94401-1214