One Happy Family, Your Financial Planner and Tax Advisor

Joshua Dobi |

This might be one of your least favorite subjects – the crossover between financial planning and taxes. At a time when many people are giving attention to their taxes, we are often giving clients information about tax implications. While we are not CPA’s, tax accountants or attorneys at North Main Financial, it is important from a planning standpoint to take into consideration what the tax implications may be for our clients. We constantly work with our clients and their CPAs, tax accountants, tax attorneys, and others, to make sure that the decisions we are making are in keeping with our client's desires as well as managing the tax implications as best as possible. In essence, your team should be one happy family!


Let’s take a step back for a minute. In 2017 there was a tax reform act passed by congress and signed by the President. This tax reform significantly impacted the 2018 calendar year as many of you have probably noticed. In fact, we haven’t seen anything this comprehensive since the late 1980s. There are a lot of moving parts to this so it’s important that you bring yourself up to speed with your accountant and how it affected you in 2018 and looking ahead to 2019.


Many people are feeling the impact if they itemized deductions on a Schedule A. There is a difference between this and standard deductions, specifically with the doubling for many people, but also the reduction in some write off capabilities on other things that may have been on your itemized deduction list. So, broadly speaking, it’s important to understand things like deductions and how it could help or hurt you. The best way to do this is to spend time with your accountant and ask questions.


Keeping the tax reform act in mind, this three-point sermon will focus on the crossover of financial planning and tax ramifications. These are just a few considerations as you review your financial plan and think ahead to your 2019 taxes.


Capital Gains vs. Ordinary Income

Ordinary income includes wages and interest income. In contrast, capital gains happen when you sell an asset such as a mutual fund, individual stock, bond, etc., for more than it’s purchase price. If you own investments like this, outside of retirement plans, then you know there is a stark difference between taxes based on capital gains versus ordinary income. While ordinary income is based on your specific tax bracket, capital gains taxes are categorized as short-term or long-term, depending on how long the seller owned the asset.


This time element can significantly impact the amount of taxes you owe in the event of a sale. If you are holding the asset for more than a year or two, depending upon the asset, you may be able to move from being in an ordinary income bracket to a capital gains income bracket. This can significantly affect, and for some people reduce, the amount of taxes they owe.  Thus, from a planning standpoint, if you are looking to sell, it could be more beneficial to hold on to an asset for a bit. This is where your financial planner and tax accountant need to communicate to make sure you are staying in step with your goals and objectives and aren’t surprised at the end of the year.



If you receive a W2 at the end of the year, you can declare a certain amount of withholding based upon exclusions, etc. Basically, you pay as you go. Meaning that each time you receive a paycheck, you pay a certain amount in withholding tax. What some people are finding is that because of the tax reform act their withholding is not enough now. Some people are getting surprised and not in a good way.


At North Main Financial we have our clients review their withholding to make sure it’s enough and don’t get surprised when they are filling out next years tax return. If you are making estimated payments (quarterly or more frequently), via a 1099 income or other kinds of sporadic, non-conforming types of income, make sure to check with your accountant to make sure your estimated payments are in line with what the IRS is expecting of you. Otherwise, you could be subject to some interest expense, penalties, etc. and there’s no need to pay that if you don’t need to.


As a note, it is possible to adjust the withholding in your paycheck by simply filling out a W4 form. It is also possible to adjust the amount of money you are paying via estimated payments by consulting with your tax accountant. Work with your accountant and/or financial planner to determine if changes need to be made. Now is a good time to review these items before we get too much deeper into the 2019 calendar year.


Business Owners

This is for anyone who owns a business whether it’s a larger business or a stay at home, service-type business. There have been changes to the things you can deduct and the amounts you can contribute to retirement plans. As a business owner, you should understand both so you can get the most benefit out of the new law.


With regards to employers with fewer than 50 employees, make sure you understand the changes that define the kinds of things you can write off as business expenses. There can often be incentive to make certain purchases, or dispositions of assets, in order to increase the benefit of your tax situation. Make sure you sit with your account to see what that impact could be – both positive and negative.


In addition to write-offs, understand the contributions you don’t or do make to retirement plans have a direct impact on your taxable income. For example, if you qualify, there may be significant reductions to your taxable income by making more retirement contributions. There can also be ramifications by not making contributions which could increase your taxes.


Think about ways in which you may want to reduce your taxable income. Evaluate your options with your accountant or CPA to make sure you are in the best place you can be.


In summary, there is a lot of cross over between financial planning and taxes. To that end, it’s important that your tax advisors and financial advisors are all on the same page. It’s also important to understand the potential outcome of your various decisions, good and bad. Communication is key to making sure you are reaching your goals and receiving the maximum benefit when it comes to your tax return.


Interested in hearing more about this topic? You can listen to the full episode of the North Main Financial radio show on WSIC by clicking here: Financial Planning and Taxes (4/13/19)


If you have questions about your financial goals, or would like to talk with us further about our services, give us a call at (704) 987-1425 or visit us at If you wish to schedule an introductory meeting, we would be happy to meet with you at no cost or obligation to you.


These Blogs are provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of SagePoint Financial.