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We’re a San Diego, Calif.-based boutique tax consulting firm focused on personalized tax and financial guidance to individuals and businesses. Here on our blog, you’ll find you’ll find news, insights, and observations from trusted sources in the world of tax planning and and financial guidance.
Complying with California’s CalSavers Mandate
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If you are a small-business owner in California, you already have a lot on your plate. From managing employees to tracking expenses and keeping up on your federal, state, and local estimated tax payments, the last thing you need is another complex regulation.
The good news is this: If you have at least one employee, other than yourself or your spouse, California’s CalSavers mandate is a regulation you can’t afford to overlook. This state-run retirement savings program is designed to help your employees save for their future without imposing an extra financial burden on you or your business. But, as you’re already well aware, compliance alone can be a burden.
In this post, we try to ease that burden by bringing you up to speed on CalSavers and guiding you through the steps to achieve compliance. Whether you’re new to the program or simply need a refresher, we have you covered!
CalSavers Fundamentals
CalSavers is a retirement savings plan for workers whose employers don’t offer a workplace retirement plan, and for self-employed individuals and others who want to save extra toward retirement. Employees contribute to a Roth IRA (individual retirement account) that belongs to them but is administered by the state.
Designed to be easy for employers and simple for employees, CalSavers is professionally managed by private sector financial firms with oversight from a public board, chaired by the State Treasurer. There are no fees for employers, and employees manage their accounts directly with CalSavers.
Determining Whether the Mandate Applies to You
Initially, the CalSavers mandate applied only to employers with five or more California W-2 employees who did not offer retirement plans to their employees. Beginning in 2025, the threshold dropped to employers with Continue reading… Continue reading… Continue reading…
Avoid Costly Mistakes with Pass-Through Entity Tax Payments
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If you use the State of California’s Franchise Tax Board (FTB) website to make an electronic payment for an elective pass-through entity, you should know ahead of time that it’s easy to make a mistake and get mixed up over personal and business payments.
Here at SWC, a San Diego-based tax planning and financial strategy firm for entrepreneurs and small business owners, real estate investors, and high-net-worth individuals, we see this happening all too often. And that’s why in this post, we explain how California’s version of the elective pass-through entity tax works and provide guidance on how to avoid making costly mistakes when paying your elective tax.
To start us off, if you’re unfamiliar with the elective pass-through entity tax, here’s what we want you to know.
Understanding the Elective Pass-Through Entity Tax
The Tax Cuts and Jobs Act (TCJA), which some have described as “the most sweeping tax overhaul in decades,” was signed into law on Dec. 22, 2017, just 50 days after it was first introduced in the U.S. House of Representative. Once enacted on Jan. 1, 2018, the TCJA limited the amount of state and local taxes (income taxes, sales taxes, and property taxes) that taxpayers are allowed to deduct when filing their federal income tax returns. This resulted in the cap being $10,000 for married couples and $5,000 for individuals (or married individuals who choose to file separately).
For example, suppose you’re a married couple living in California, and you paid $7,000 in state income taxes and $6,000 in property taxes. That’s $13,000 total. Under the TCJA, when you’re filing your federal income tax return, you would be able to deduct only $10,000 from your taxable income, not the full $13,000.
Understanding that this cap could be especially burdensome for taxpayers in states with high income taxes and/or high property taxes, some states, such as California, enacted an elective pass-through entity tax as a workaround. In California, this workaround is detailed in California Assembly Bill 150 — the Sales and Use Tax Law: Personal Income Tax Law: Corporation Tax Law: Budget Act of 2021.
A pass-through entity (PTE) is a legal business structure wherein income flows through to the business entity’s owners and investors, rendering the income of the entity as the income of the owners or investors. Pass-through entities include sole-proprietorships, limited liability companies (LLCs), partnerships, and S-corporations.
How California Elective Pass-Through Entity (PTE) Tax Works
California’s elective pass-through entity (PTE) tax isn’t very complicated, and here’s how it works: Continue reading… Continue reading… Continue reading…
10 New California Laws That Could Impact Your Taxes in 2025
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As we enter 2025, a host of new laws are taking effect in California, many that could directly influence your tax planning and finances. From reforms in banking and food delivery to freelancer protections and new insurance mandates, these changes could play a role in how you approach your tax planning.
Here’s what you need to know:
Ban on Certain Bank Fees
California Assembly Bill (AB) 2017 prohibits state-chartered banks and credit unions from charging fees for declined ATM withdrawals due to insufficient funds. Effective Jan. 1, 2025, this new law could save you from unexpected penalties.
- Tax Planning Impact: Reduced banking fees mean fewer deductions for penalty-related costs. While this may not affect you, it’s a healthy reminder to evaluate other areas of tax planning where savings or reduced deductions might come into play.
Paid Family Leave Expansion
Starting Jan. 1, AB 2123 (Changes in Managing Employee Leave under Paid Family Leave Act) ensures that employers can no longer require workers to use accrued vacation time before accessing the state’s Paid Family Leave Program.
- Tax Planning Impact for Individuals: If you plan to take Paid Family Leave, remember that benefits from the state program may be taxable. Here at SWC, we recommend that you consider setting aside funds for potential tax liabilities to adjust your withholding or estimated tax payments.
- Tax Planning Guidance for Business Owners: We recommend that you review your policies and payroll processes to ensure compliance with the new rule. Consider how this change may affect your labor costs or employee coverage needs and ask us for help in updating your tax strategy accordingly, if you’re unsure what to do.
Freelancer Protections Against Late Payments
Under California Senate Bill (SB) 988 (Freelance Worker Protection Act), effective Jan. 1, companies must pay independent contractors by the date specified in their contracts — or within Continue reading… Continue reading… Continue reading…
Breaking: New Deadlines for Beneficial Ownership Reporting Announced
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Editor’s Note (August 2026): Since this post was originally published, the federal government has changed the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act. U.S.-formed companies are now exempt from BOI reporting requirements. The reporting rules generally apply only to certain entities formed under foreign law that are registered to do business in the United States. As a result, the BOI filing requirements described below no longer apply to U.S.-formed businesses. For additional details on the ruling, read the U.S. Department of Treasury’s Beneficial Ownership Information Reporting Requirement Revision (PDF file).
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The world of compliance and financial reporting is complex, and staying informed of recent changes in rules and regulations is essential to protecting your business and avoiding costly fines.
Recent court decisions surrounding the Corporate Transparency Act (CTA) and its beneficial ownership information (BOI) reporting rule have reshaped the reporting landscape yet again. Yesterday, another court weighed in on the BOI. Here’s what you need to know to stay ahead.
What Happened with the BOI and How Does It Affect Your Business?
On December 23, 2024, a panel of Fifth Circuit judges granted the government’s motion to stay a December 3, 2024, nationwide preliminary injunction ordered in the Texas Top Cop Shop, Inc., v. Garland case. What that means is the court reinstated the reporting requirements for beneficial ownership information (BOI) with the Financial Crimes Enforcement Network (FinCEN).
Going back a bit further, the CTA, which was established by Congress as part of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, seeks to combat financial crimes by increasing transparency surrounding corporate ownership. When the legislation was sent to the President to sign into law in December of 2020, he vetoed it, after which the U.S. House of Representatives and the United States Senate both voted to override the veto, making the Act’s beneficial ownership information requirement effective as of Jan. 1, 2021.
For now, as a result of yesterday’s ruling, most businesses are required to comply with the CTA’s reporting requirements, with extended deadlines to account for the injunction’s temporary impact.
Updated Deadlines You Need to Know About
To give businesses time to adjust to the reinstated reporting requirements, the U.S. Department of the Treasury has extended several deadlines:
- For Companies Created or Registered Before January 1, 2024:
- New Deadline: January 13, 2025
(Previously, these companies would have had to report by January 1, 2025.)
- New Deadline: January 13, 2025
- For Companies Created or Registered Between September 4, 2024, and December 23, 2024:
- New Deadline: January 13, 2025
- For Companies Created or Registered Between December 3, 2024, and December 23, 2024:
- New Deadline: 21 days after their original filing deadline.
- For Disaster Relief-Eligible Companies:
- Deadline: The later of January 13, 2025, or the extended deadline specified for disaster relief.
- For Companies Created or Registered After January 1, 2025:
- Deadline: 30 days after receiving notice that their registration or creation is effective.
Why These Deadlines Matter Continue reading… Continue reading… Continue reading…
Heads Up! Four Things You Need to Know Before the End of Tax Year 2024
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As the calendar year draws to a close, changes to the tax code and regulations are inevitable — regardless of which political party holds sway in Washington, D.C., or controls state legislatures in California or elsewhere.
The end of 2024 is no exception, with several updates that could save you or your business money as we enter the new year or leave you with less of your hard-earned money in 2025.
Here are four items to be aware of as we approach year-end:
- Maxing out your tax-deferred retirement contributions
- FSA contribution limit increases for 2025
- Qualified charitable distributions for eligible IRA owners by year-end
- Recent change to Beneficial Ownership Information (BOI) reporting
As we’ll explore below, there’s still time to take advantage of the first three tax-saving opportunities before the year ends. For the fourth item — beneficial ownership information reporting — while you also have time to file before the beginning of the year, a recent court ruling favors anyone concerned about the prospect of facing fines or criminal charges for failing to do so.
Here’s what you need to know to make informed decisions before 2024 comes to a close.
Maxing Out Your Tax-deferred Retirement Contributions
For 2024, the IRS has increased contribution limits for various retirement accounts: Continue reading… Continue reading… Continue reading…
Using an S Corporation to Reduce Your Income Tax
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If you’re an entrepreneur or small-business owner, you may be aware of a common tactic for reducing your income tax: You form an S corporation and then use it to pay yourself a combination of wages and distributions. Put simply, an S corporation is a corporation that chooses to be taxed as a pass-through entity (a business structure where the profits and losses “pass through” directly to the owners, who report them on their personal tax returns, instead of the business paying corporate taxes).
Under this plan, you pay income tax on both wages and distributions, but you pay self-employment tax — Social Security and Medicare — only on wages. Income from distributions is not subject to Social Security and Medicare withholding.
On its surface, this tactic saves you about 15.3 percent in taxes on the amount you pay yourself in distributions, because as an employer/employee, you’re responsible for paying both halves of Social Security and Medicare. As an employer, you pay 6.2 percent Social Security and 1.45 percent Medicare, and an amount equivalent to that as employee. If you crunch the numbers, that’s 6.2 percent + 1.45 percent = 7.65 percent x 2 = 15.3 percent.
However, you need to be aware of three important considerations: Continue reading… Continue reading… Continue reading…
Tax Planning for a Second Trump Presidency
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The votes are in, the winner has been declared. Now’s the time to start planning your taxes around the second Trump presidency (2025-2028). Of course, taxes aren’t entirely within the purview of the President of the United States — only Congress has the power to change the tax code. However, the president has tremendous influence over it.
For his part, the president proposes tax policies that can influence public opinion, rallies Congress to pass tax legislation, and has the power to veto any tax legislation proposed by Congress. And while the president can’t change the tax code through executive orders, he can direct agencies to implement certain tax policies or interpretations and pay less attention to others.
So, what changes to the tax code can we expect from a second Trump presidency? In many ways, we can expect to see more of the same — an extension of many of the provisions in the Tax Cut and Jobs Act (TCJA) that Congress approved in late 2017 near the middle of the first Trump presidency. In addition, we can likely count on additional tax relief to promote growth and increase take-home pay for workers.
In this post, we review key provisions of the TCJA, which will expire at the end of 2025 unless Congress acts to extend them, and we highlight changes to the tax code that Trump proposed during his campaign.
Tax Cut and Jobs Act Provisions That Are Set to Expire in 2025
Many of the TCJA provisions were intended to be temporary. Unless Congress acts to extend them, the following provisions are set to expire at the end of 2025: Continue reading… Continue reading… Continue reading…
Last-Minute Moves for Small Businesses to Reduce 2024 Federal Income Tax
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As the clock ticks down toward the end of the 2024 tax year, tax-saving opportunities are about to disappear. If you’re a business owner or entrepreneur, you still have time to implement a few tax-saving strategies, but you’d better hurry — time is running out.
In this two-part series, we share tax-saving strategies you can implement prior to the end of the tax year to reduce your tax obligation for 2024. In Part 1, we focused on strategies for individual taxpayers. In Part 2 of this series, we shift our focus to tax-saving strategies for business owners, starting with tax-favored retirement plans.
Contribute to a Tax-Favored Retirement Plan
By contributing to a tax-favored retirement plan, you can reduce your business’s taxable income and allow your contributions to grow tax-free until you withdraw the money. As a business owner, you have several options:
- Contribute to an Individual Retirement Account (IRA). This is the simplest option, but it also has the lowest cap at $7,000 for 2024. If you’re over the age of 50, you can make an additional $1,000 catch-up contribution.
- Create a Simplified Employee Pension (SEP) plan. With a SEP, you can contribute up to 20 percent of your net self-employment income for 2024. If you are employed by your own corporation, you can contribute up to 25 percent of your salary. The maximum contribution in either case is $69,000.
- Establish a 401(k) plan. A 401(k) plan offers the same benefits as a SEP plan but also allows for matching employer contributions, meaning you can move more pre-tax money into the plan.
- Use a SIMPLE IRA. SIMPLE stands for Savings Incentive Match Plan for Employees. A SIMPLE IRA (Individual Retirement Account) can be a good choice if your business income is modest.
Contact us for information about your options for 2024 and to explore long-term solutions that may reduce your tax bill and accelerate the rate at which you build wealth in the future.
Remember: If your business has employees, you may need to cover them too.
Participating in a Tax Projection Meeting in November or December can help you estimate your 2024 tax liability and adjust your withholding or calculate an estimated tax payment to minimize any potential underpayment penalty.
To schedule a year-end Tax Projection Meeting with SWC Founding Partner Marni Walker, please call our office at (858) 487-4580.
To schedule with Founding Partner Laura Stees, visit www.SWC.cpa/Contact, click “Schedule an Appointment,” then select “Tax Projection” to choose a convenient day and time.
Maximize your Section 179 Deductions
If you need equipment or software for your business, you can write off the cost up to the Section 179 deduction limit of $1.22 million for 2024. Most types of personal property and off-the-shelf software used for business are eligible for Section 179 deductions.
Section 179 deductions also can be claimed for the following: Continue reading… Continue reading… Continue reading…
Last-Minute Moves for Individual Taxpayers to Reduce 2024 Federal Income Tax
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With only two months remaining in the tax year, the time has come to get serious about reducing your 2024 federal income tax bill. The good news is that it’s not too late. The bad news is that you’re running out of time.
In this two-part series, we share tax-saving strategies you can implement prior to the end of this year to reduce your tax obligation for 2024. In Part 1, we focus on strategies for individual taxpayers. In Part 2, we shift our focus to tax-saving strategies for business owners.
Note: For now, we’re assuming that the tax law currently in effect for 2024 will remain in place. If anything changes due to the outcome of the upcoming election, we will certainly let you know. However, any changes to the tax code that would apply retroactively to 2024 would require an act of Congress, which isn’t likely.
Check Your Tax Withholding and Estimated Payments
To avoid any underpayment penalty, make sure the Federal Income Tax (FIT) withheld from your paychecks plus any estimated tax payments for 2024 is equal or greater than:
- Your 2023 tax liability, or 110 percent of your 2023 tax liability if your 2023 adjusted gross income (AGI) exceeded $150,000 if you file as Married Filing Jointly (or $75,000 if you file as Married Filing Single), or
- 90 percent of your 2024 tax liability
Participating in a Tax Projection Meeting in November or December can help you estimate your 2024 tax liability and adjust your withholding or calculate an estimated tax payment to minimize any potential underpayment penalty.
To schedule a year-end Tax Projection Meeting with SWC Founding Partner Marni Walker, please call our office at (858) 487-4580.
To schedule with Founding Partner Laura Stees, visit www.SWC.cpa/Contact, click “Schedule an Appointment,” then select “Tax Projection” to choose a convenient day and time.
Consider Bunching Itemized Deductions
Each year, you can deduct the greater of your itemized deductions (mortgage interest, charitable contributions, medical expenses, and taxes) or the standard deduction. The 2024 standard deduction is as follows:
- $29,200 for couples who are married filing jointly (MFJ)
- $14,600 for singles and for individuals who are married filing separately (MFS)
- $21,900 for those who file as head of household (HOH).
If your total itemized deductions exceed your standard deduction every year, itemizing every year is best. However, if your total itemized deductions are close to the standard deduction without exceeding it, you may be able to save money by “bunching” your itemized deductions, so they exceed your standard deduction every other year.
For example, if you file a joint return and your itemized deductions are steady at around $28,000 per year, you will end up claiming the standard deduction in both 2024 and 2025. However, if you can bunch expenditures so that you have itemized deductions of $32,000 in 2024 and $24,000 in 2025, you could itemize in 2024 and get a $32,000 deduction versus a $29,200 standard deduction. In 2025, your itemized deductions would be below the standard deduction, so you’d claim the standard deduction.
Here are a few ways you can bunch deductions by moving them into an earlier tax year: Continue reading… Continue reading… Continue reading…
Tax Planning: It’s Not Just for the Super Wealthy
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It’s no secret that some of the wealthiest people in the United States pay the least income tax. According to some reports, billionaires can even get their income tax down to zero, and it’s entirely legal.
In some instances, they build their wealth through ownership of shares in one or more companies and then borrow against that wealth to cover their expenses. And because they don’t realize any gains from selling shares, they’re not earning income subject to tax. In fact, they can even claim the interest they pay on their loans as a deduction against any income they earn!
Here at SWC, that’s what we call savvy tax planning. Don’t you wish you could do that?
Well, you may not be wealthy enough or low-income enough to pay zero income tax, but if you’re somewhere in between, strategies are available for reducing your tax bill and building your wealth at an accelerated rate. Tax-saving strategies include maximizing tax deductions and credits and contributing to tax-deferred retirement accounts. And you don’t have to be super-rich to take advantage of them. You just need to engage in tax planning.
What Is Tax Planning?
Tax planning is the process of analyzing your financial situation to minimize tax liabilities. It involves careful consideration of income, expenses, investments, deductions, credits, and future opportunities to take advantage of all available tax laws and regulations.
Suffice it to say, tax planning plays a crucial role in building wealth. By investing some or all of the money you save on taxes, you can provide yourself with additional tax-savings options while your investments grow in value.
Understanding Tax Planning: Tax planning is the exercise of reviewing the amount of tax you pay in an effort to maximize your after-tax income. To do this properly, it is important to understand myriad federal and state rules and regulations related to deductions, credits, income deferral, and tax minimization strategies where possible.
When you engage with a tax planning firm like SWC, the process is designed to help you or your business pay the least amount of tax legally possible, based on current tax law and regulations as they relate to your current and future financial goals and objectives. Legal tax strategies encompass leveraging retirement planning, estate planning, investment income, investment vehicles, and the optimization of your business operations if you own a business or work in an entrepreneurial capacity.
Here are some of the ways tax planning can help you build wealth: Continue reading… Continue reading… Continue reading…