Capital Gains Advisory

02/14/2026

So I'm hearing that the IRS is picking up in audits of preparers for due diligence on Child and Earned Income Credit.

I have mixed feelings about this. On the one hand, I'm happy that the IRS is going after preparers who break the rules.

On the other hand they likely will be going after preparers who serve certain communities and will ultimately exacerbate many of the problems that financially underserved individuals deal with.

That's because the most predatory preparers don't have PTINs or EFINs. They are what we call ghost preparers and tracking them can often be much more difficult than going after a tax office.

Furthermore there are bigger enforcement issues that are being ignored. Specifically around preparers filing fraudulent business returns with imaginary or improper deductions. Or ultra wealthy tax evaders who improperly use certain strategies to evade their tax obligations.

06/15/2024

06/07/2024

We are back at work after a much needed vacation.

As much as we advocate financial responsibility, remember that ROIs can't measure happiness. Nor can they measure the creativity and insights that travelling can provide. It's a huge world. We only see a tiny fraction in our finite life. Travelling expands our viewpoints and understanding exponentially.

12/30/2023

As the year ends...don't forget these personal finance to dos.

Share with someone who may need this.

Not sure if any of these applies. DM me and I'll give you some guidance.

11/29/2023

Did you buy something on Black Friday for work?

Personally I purchased some research subscriptions.

Maybe you are wondering if you can deduct what you bought?

If you are an employee, you can no longer deduct work expenses. Unless you have an accountable plan, in which case you can receive a tax free reimbursement.

If you are a small business owner, you can deduct work related expenses. Even if you used a personal credit card, or don't have an LLC. However large expenses may require you to depreciate the cost over multiple years rather than deduct the cost of the item in one year.

Remember that deductions aren't the same as tax savings. The higher your income, the more the deduction matters. The lower your income, the less it matters.

If you want bang for your buck, you should try to plan depreciation around years when you have a windfall. By the same token, as the year comes to an end, it's also a good time to look at what your marginal tax rate will be and see whether you want to book income in 2023, or try to drag it out until 2024. Depending on whether you are cash or accrual, different rules apply.

07/21/2023

Next week the IRS Tax Forum comes to Atlanta. Why is this a big deal? CPAs, EAs and Tax Attorneys will have the opportunity to meet with IRS Agents face to face and discuss specific client cases. This is the rare chance to get a quick resolution to an outstanding tax problem.

If you need help, message me this weekend and we can talk. But time is short.

06/28/2023

Wanted to take a moment and talk about Capital Gains Tax

One of the most misunderstood taxes in America is Capital Gains Tax. Here's what you need to know:

Capital Gains Tax (CGT) is a tax that is charged on the profits from the sale of any item which has appreciated in value since the seller initially bought it. For most people CGT will result from the sale of stocks, bonds, investment funds, or real property (a house).

In order to encourage citizens to make long term investments, sales on property which has been held for at least 1 year AND 1 day (long term); is charged at a favorable rate called Long Term Capital Gains (LTCG). In some cases investors may pay 0% on their investment returns. The maximum tax is generally 20%. There are two exceptions to this rule (collectibles and property that was depreciated for business purposes).

All property sold after only one year or less is called Short Term Capital Gains Property (STCG) and is charged at the same tax rate as ordinary income which can be up to 37% for the highest earners but generally maxes at 22%-32% for most individuals.

For most people, CGT becomes a concern when selling a house that they've been renting, or that they've lived in for many years and which has substantially appreciated. If someone has worked for a public company, or has actively invested in a taxable account, they may also face questions about CGT.

When facing any of these situations, having a good tax expert is worth it's weight in gold. The time to retain them is BEFORE you start the selling process, not after.

In the case of a house, a tax expert can look to see if any gains can be deferred or excluded. They can also make sure you keep proper records as to fees paid in the transactions. If you do owe taxes on the sale, they can make sure you aren't penalized a withholding underpayment penalty.

Let's give an example. John and Mary are selling their home which has appreciated over 250k since they first bought the home 22 months ago. They make 60k each and for simplicity sake we will say they have taxable income of 100k before the sale of the home. Adding the sale of the home they now have 200k in taxable income.

They will pay a progressive tax rate on their taxable income.
No taxes for the first 20k
12% taxes for the next 60k
22% taxes for the last 20k (we are rounding)

As a LTCG (>1 year & 1 day) they are eligible for a special rate of 15% which applies equally on all 100k of the sale.

BUT

If they speak with their tax expert ahead of time, he may advise them to consider waiting 2 months. After 2 months they would potentially be eligible to exclude up to 500k in Capital Gains on the sale of their home. This means they would pay 0 taxes on the sale of their home.

BUT

What if they have to go now?

They may be eligible for a partial exclusion. A tax expert could analyze if you were expert for the partial exclusion which would be 22/24 * the 500k, reducing the tax bill again down to 0.

BUT

A really good expert might also look to see if it would be worth Filing Separately. If they filed separately, one spouse would use their partial exclusion (about 229k, leaving 20k subject to taxes) and the other would keep their exclusion.

This might be a good idea if they were moving into a secondary home which they already owned. If this home also had appreciation in it's value, and if selling it was a realistic possibility, then having this exclusion in hand could save upwards of 30k in the event of a sale.

Final note:

Don't expect your preparer at a franchised tax office to do these things for you. These preparers may have little to no training in taxes as the only legal requirement is a $25 fee.

If you are facing a decision like this, talk with an Enrolled Agent, a CPA or a Tax Attorney. These are the only paid professionals that the IRS allows to unlimited powers of representation for individuals in an audit.

I'm Steve, I'm an Enrolled Agent, and I advise people on how to plan for Capital Gains Taxes.

04/20/2023

Had a huge deadline day victory. New client was facing a 41,000 Federal Tax Obligation due to Capital Gains Tax along with poor estimated tax planning. We spotted a mistake in the return which lowered taxable income by 50k. We were able to drive further savings by opening a SEP and maxing his 2022 contributions.

End result, 41,000 dropped to 26,000. 15,000 in savings.

Big financial events require proper planning.

02/17/2023

As we scramble to open, we know many individuals are scrambling to get ready for tax time. For small business owners, March 15, not April 15 is the deadline for filing their taxes. Does this affect you? How can you know? It all depends on your business structure.

If you have no formal business structure, then you will file your business taxes with your personal income taxes.

If you incorporated your business (NOT AN LLC election) then by default you must file Corporate Taxes under Sub Chapter C (commonly called a C Corp). Those taxes are also due 4/15.

But what if you (like me) have an LLC?

You may not know what taxes you need to file. Here are the rules.

-Single Member LLC...you will file Schedule C with your personal income taxes UNLESS you filed an S-Corp election before 2/15 of last year OR within 75 days of starting your business last year.

-Two Member LLC...if you and your wife are partners in an LLC. You have the choice of filing a partnership return...or filing as a Qualified Joint Venture...meaning you can both fill out your share of the business on Separate Schedule Cs. This ONLY applies to husband and wife. If the other member of the partnership is not a spouse, you must file a partnership return.

-3+ Member LLC. You must file a partnership return

A very common question I've heard from LLC filers is "am I an S-Corp?" Or "I want to be an S-Corp." Be careful what you wish for.

If you filed an S-Corp election before 2/15 of last year OR within 75 days of starting your business last year, then you must file as an S-Corp and not as a partnership or any other entity. This is paperwork you would have filed with the IRS. If you aren't sure...it's 99% likely you did not unless you have an accountant.

Maybe you have heard that S-Corp is the magical tax-free solution for small business owners., and you are wondering "is this really a tax free small business life hack?"

No, not even close. If you are an owner-employee of a business and you elect to be taxed as an S-Corp...you must pay yourself a reasonable salary subject to FUTA, F**A just the same as you would if you were an employee. If you withdraw money from the business in addition to the salary you pay yourself, some of this may be tax free, or be subject only to capital gains tax at a preferred tax rate.

However this structure means you will need payroll services. You will also need bookkeeping, and tax preparation for the S-Corp. This thousands of dollars of additional services you will need to pay for. For most small business owners, this route doesn't make financial sense.

Worse, failure to do these things could lead to your S-Corp status being revoked, along with substantial accuracy penalties on previous tax returns.

Don't believe everything you hear on TikTok, read on the Internet. Especially be wary if the person giving you tax advice isn't a CPA, Enrolled Agent, EA, CFP or a Tax Attorney. Titles like "Tax Specialist, Tax Advisor, Tax Consultant, Financial Planner" without one of these credentials may indicate that the person has bestowed this title upon themselves. Especially be wary if they then try to sell you a book, or an online program.

Hopefully this post simplifies some of the questions small business owners have about tax filings. If you have any questions or are unclear, reach out and I'd be happy to discuss it with you.