Dr. Rastogi can help clients in comprehensive Financial Planning as may be needed for the different stages of their lives. A typical financial planning can include, Investment planning, Retirement planning, education savings, Estate Planning, and Insurance planning. A brief description of each type of these plans is given below,
Savings and Investment Planning – This is needed by every client at every moment of life and can continue for all clients for the whole span of their lives. Dr. Rastogi can help clients in strategically saving funds and finally investing for growth. Though the gain on any investments may be taxable but some of the choices such as investing in municipal bonds may result in a non-taxable gain. A complete detailed analysis has been given under investment planning.
Retirement Planning – Dr. Rastogi’s advice to all clients for retirement planning is that all clients should start planning for retirement as early as possible in their lives. As a first step, all self-employed clients should maximize their social security contribution to get maximum social security benefits at retirement. Secondarily, clients need to choose the right retirement plan to maximize tax-deferred retirement savings depending upon the entity they have formed to operate their business. The details of importance entity formation are outlined under the topic Business Savings. A client can choose one of the retirement plans from various plans as outlined under the topic of Retirement Planning. The choices include, IRA, Roth IRA, SEP IRA, 401 K, 403 K, and 457. All these plans have different annual limits for contribution and change on a year to year basis. Any distribution or withdrawal from a retirement plan before 59 ½ years of age may have an early distribution penalty and taxable consequences. Dr. Rastogi can guide the client about choosing the right retirement plan, contribution amount to a retirement plan, and consequences of taxes and penalties in case of early withdrawal or distribution from the retirement plans.
Education or College Savings – Dr. Rastogi can help clients in planning how to save funds for children’s college education either under a 529 education plan or Coverdell education plan. The funds contributed to an education plan can have tax free growth for federal and state income taxes. Some of the states also have tax-deductible contributions into a 529 education plan. Pennsylvania is one of the states that give tax-deductible advantage to a 529 plan contribution. For every client, savings for children’s college education is one of the most important goals of life. A client needs to start a college education 529 plan at the birth of a child. A client has about 15 years before they start to withdraw funds for college and now for secondary education also. A client can now withdraw funds for secondary education for an annual withdrawal limit of $10,000 per child. However, there is no maximum limit for contribution under a 529 education plan but for 2020, a $15,000 gift limit applies per child per year. A parent or grandparent can contribute up to $15000 without having a gift tax per year per child. The details of the Education Savings plan are outlined in the separate section.
Estate Planning –
Estate planning is the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.
1. Estate planning involves determining how an individual’s assets will be preserved, managed, and distributed after death or in the event they become incapacitated.
2. Planning tasks include making a will, setting up trusts, and/or making charitable donations to limit estate taxes, naming an executor and beneficiaries, and setting up funeral arrangements.
3. A will is a legal document that provides instructions on how an individual’s property and custody of minor children, if any, should be handled after death.
4.Various strategies can be used to limit taxes on an estate, from creating trusts to making charitable donations.
Dr. Rastogi can help a client in finding the right sources for implementing the estate planning that may help in reducing taxes on an estate. The estate planning may have direct implications on tax preparation for a self-employed client.
Insurance Planning –
There are generally eight different types of insurance, and the insurance premiums for each vary. These include life insurance, auto insurance, homeowner’s insurance, liability insurance, disability insurance, health insurance, and long-term care insurance. Some of the insurances can be categorized as expenses of a business. We have explained each type in more detail below.
Life insurance: This form of insurance is payable when you die. It allows any beneficiaries, such as your surviving spouse, dependents, or children, to receive funds that can be used for things such as living expenses or debt. Life insurance costs can vary, depending on factors such as age, health, gender, and type of coverage. In general, individual life insurance does not have any tax advantage unless, in a partnership LLC, partners purchase each other’s life insurance.
Auto insurance: This is a contractual agreement between you and an insurance company that protects you against financial loss resulting from theft. It also protects you from damage to your vehicle and/or from any damages caused by you or someone driving your vehicle. If an auto is used in a business, auto insurance can become part of business expense.
Homeowners Insurance: With homeowners’ insurance, you can protect your home against any disaster-related damages such as fire, vandalism, or theft. What homeowner’s insurance does not cover, however, is earthquake or flood-related damages. Earthquake insurance and flood insurance are two different types of policies. Personal home insurance does not have any tax advantage.
Liability Insurance: This form of insurance applies to policyholders who have exhausted their liability and lawsuit coverage in other policies. In a business liability insurance can help in protecting the assets of the businesses.
Disability Insurance: Disability insurance replaces a percentage of your lost income if you are unable to work for extended periods. In a business, this may be tax-deductible expenses.
Health Insurance: Often available privately or through employers, health insurance keeps you covered when it comes to any expected or unexpected medical expenses. For self-employed clients, these could be classified as business expenses and can have a direct impact on tax deductions. One of the options that Dr. Rastogi recommends to his clients to buy a high dedictible health insurance with HSA acounts. HSA accoounts contributions are tax deductble at the personal tax level.
Long-term Care Insurance: This type of insurance covers the costs associated with long-term care. Such costs typically are not covered by health insurance and do not have any tax deduction.
Malpractice Insurance: This type of insurance is essential to protect the business due to any error and omissions in operating a business. This type of insurance is tax-deductible expenses.
Dr. Rastogi can advise a client in choosing the required insurance policies related to a business. This will help in reducing taxes as the business-related insurance premiums can be considered as part of business expenses. This can be part of tax savings in tax preparation.
