Using TaxPlanIQ to Build Wealth and Prepare for Retirement

Unlocking Tax Savings: Mastering the Augusta Rule (Section 280A) for Small Business Owners
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While TaxPlanIQ is the perfect tool for accountants looking to help their clients build out a tax plan, it can also be used to help clients build wealth and prepare for retirement through tax planning. 

TaxPlanIQ helps you make better decisions for your clients that save them time, money, and stress. TaxPlanIQ shows the total tax savings your clients will see when they work with your firm, and they can use those tax savings to invest in their portfolio or in their future.

Below are two case studies that demonstrate how you can use TaxPlanIQ to demonstrate how tax planning can help clients build wealth and prepare for retirement and show them the value of working with you.

Case #1

Shelita and Sharla discussed a tax plan for one of Shelita’s clients. Shelita wants to optimize her plan to help her client capitalize on all of the tax benefits he can and generate passive income across the board.

Background Info

The client resides in California and has worked with his CPA for 18 years. He has an S-Corp and a taxable income of approximately $300k. He just purchased a fourplex in December 2021, unaware of depreciation strategies. The client works as a headhunter for the S-Corp, and the CPA determines reasonable compensation for him every year. The client also has 3 kids all under the age of 18 (8, 10, 12). 

Ways to Save

Shelita had a basic plan set up for her client and talked through it with Sharla. To start with, Shelita would like to see the fourplex put in an LLC, however, the fourplex is set up in a trust with some basic protections. Additionally, she would like to do a cost seg on the property. She would also like to have the client act on the Augusta Rule, which would allow the client to rent out his home for up to 14 days. Lastly, Shelita would like to see the client hire his children in some capacity.

What to do with the fourplex

“I wouldn’t try to move that out of the LLC right now,” Sharla said. “Maybe in the future if it meets some goals. Because, he already has a lot of the structure set up that you’re going to need to do tax planning.”

However, Sharla pointed out that she has never seen a cost seg done in a trust but that they needed to know what kind of trust it was in. So, they reviewed the client’s 1040 to see if they could determine the type of trust from either a Schedule C or a K-1. As they were reviewing the 1040, Shelita mentioned that the client has their primary residence listed in the same trust, which can make things a little complex.

“I wouldn’t want my primary residence in the same trust as an income-generating property,” Sharla said.

That said, Sharla wondered if there was some potential for the client to be classified as an active real estate professional. Shelita stated that presently the client has a management company taking care of the fourplex, but that’s something that he would be interested in taking a look at later on down the road, not necessarily for himself but for his spouse. Having taken a look at the client’s documentation, Sharla said that having the spouse register as an active real estate professional would be a slam dunk because she is solely employed by her husband’s corporation.

Circling back to the issue of the cost seg, Sharla told Shelita that she can’t really do a cost seg for 2021. Shelita mentioned that a tax filer that she had spoken with informed her that as long as she filed for an extension that he could get the cost seg done for this year’s tax return.

“It’s not about timing to get it done. There’s time to get it done,” Sharla said. “You don’t have any income to apply it to. There is no rent income to apply it to, because he didn’t buy it until December 2021. So, you don’t want to do a cost seg without any income.”

However, because he has all four units filled in 2022, a cost seg would be a very viable option in next year’s tax return, but again, they need to determine what kind of trust that the property is in. Sharla’s personal preference would be to see the property conveyed over to an LLC and all further family holdings conveyed into a limited partnership.

Adjusting the tax rate

As they were reviewing Shelita’s plan in TaxPlanIQ, Sharla noted that the tax rate seemed a little off given the corporation’s average revenue level. Shelita noted that the corporation really felt the impact of COVID-19 in 2020, but Sharla replied that she can’t use 2020 as a marker because it wasn’t a normal year.

She recommended that Shelita bump up the marginal rate to the 32% or 35% bracket, based on the average revenue of the S-Corp.

Investment money

The client did a cash refinance of his home and wound up with about $650k to invest in a variety of areas in order to create some passive income. The client is already doing a contributions plan, maxing out his 401K, and profit-sharing plan. Sharla asked if he was participating in a Defined Benefits plan because that would allow him to invest about $200k–$300k.

Shelita noted that she will look into that but that the client is really driven by return on investment, not just tax savings. Sharla replied that Shelita’s approach should be to present this to him not only as a means of garnering some considerable tax savings but also as a way to increase his investment ability going forward.

“If he’s making a $300k contribution to the defined benefit plan at a 32% marginal tax rate, he should see about $100k in tax savings from that, which he can funnel right into his existing investment strategy,” Sharla said. “We’re helping them generate wealth through tax savings.”


Shelita’s initial plan would see an estimated $83k in tax savings. However, without knowing some key details about the client’s particular situation, they were unable to delve too deeply into exact tax planning and ROI.

Some of the next steps Sharla discussed with Shelita include: 

  • Determine what kind of trust the fourplex is in
  • Increase tax rate to 32–35%
  • Discuss investing in a defined benefits plan

Case #2

Sharla met with a new TaxPlanIQ user named Vonda. Vonda wanted to discuss an existing client who has had no tax planning done for her at all and see what she could do for her.

Background Info

Vonda’s client is a realtor her husband just started a trucking business. Vonda did their tax return last year. The client told Vonda that she’s set to make about $100k more than last year. Though she hasn’t yet, the client is looking to make an S-corp election. Vonda plans to put her into a retirement plan—presently client is just putting money away in a 401k—and set up a health accountable plan. The client has $179k of taxable income with a projected income of about $300k in 2022.


Because Vonda is new to the platform, Sharla helped walk her through the process of creating a tax plan for her client.

Choice of Entity Election

The first strategy that they worked on was a choice of entity election. Because Vonda knew that the client planned to make an S-Corp election, it was easy to get that plan set up. Sharla noted that there are two line item strategies that need to be laid out.

The first has to do with Self-Employment Tax. Sharla set the planned amount to $72k with a projected tax savings of $15k. The second is focused on Medicare. Sharla set the planned amount to $153k with a projected tax savings of $4k.

Accountable Plan

Sharla moved on to helping Vonda set up an Accountable Plan for her client, explaining that the Accountable Plan doesn’t help pay for medical expenses, rather it helps clients get reimbursed for business expenses they personally paid, like a home office expense. With a planned amount of $5k, Vonda’s client would see about $1.2k of combined tax savings.

Retirement Plan

Presently, the client only has a 401k, and she only just opened it. Other than that she has no other retirement funds or plans. The account is set up in her name, though it isn’t a solo account.

“What I would recommend,” Sharla said, “is to set up a solo 401k in the company’s name. Because she can contribute up to $57k depending on what her salary is.”

If she contributed $26k in her personal account, she would see $7.5k in combined tax savings. If she moved forward with a solo 401k through the company with a planned amount of approximately $19k, she would see a combined tax savings of $5.6k.

Healthcare Plan

The client doesn’t have any healthcare and, therefore, no HSA. Vonda is sure that she can convince the client of the benefit of having health insurance in order to maximize her tax savings.

“While medical insurance can be expensive, high deductible plans are much cheaper,” Sharla said. “Once she has a plan, you can get her into an HSA and let that HSA grow. You don’t touch it. Then, you can reimburse yourself through a MERP.”

Once health insurance has been set up, the wife can pay the husband a $5,000 consultation fee in order to have the husband claim it on a Schedule C which will enable them to set up and use a MERP.


Vonda’s Phase One Tax Plan would garner the client an estimated $40k in tax savings. Without knowing the specific details of what’s going on with the husband’s new trucking company—whether it’s profitable or not and if it’s losing money, how much, they were unable to delve too deeply into exact tax planning. However, Sharla did take a quick look at the projected ROI. In Years One and Two, the client would see an estimated $40k in tax savings, and over a ten-year period, they would see $357k in tax savings. The initial ROI would be 309% in Year One, and 370% in subsequent years.

Some of the next steps Sharla discussed with Vonda include: 

  • Figuring out the profitability and losses from the trucking company
  • Determining whether the client falls into the 24% or 32% tax rate
  • Encouraging the client to get health insurance so they can set up an HSA and a MERP

If you are interested in using TaxPlanIQ to better explain your value to your clients, sign up for a free trial today!

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