Tax Planning and Accounting Case Studies
Every client brings a different combination of financial priorities, tax considerations, and long-term goals. These case studies illustrate how Rapacki + Co. has helped individuals, couples, and small-business owners evaluate their options, reduce financial uncertainty, and make more informed decisions.
Located in Edina, Minnesota, our CPA firm provides tax preparation, proactive tax planning and accounting guidance for clients throughout Minneapolis and the Twin Cities. Names and identifying details have been changed to protect client confidentiality. Each client’s circumstances are unique, and results will vary.
Tax Planning for a Growing Sole Proprietor
A 34-year-old self-employed professional had been filing her taxes as a sole proprietor. As her business income increased, so did her tax obligations. She came to Rapacki + Co. for help understanding whether a different business structure could reduce her tax burden and support her long-term savings goals.
Our Tax and Business Analysis
We reviewed her previous two years of tax returns and discussed her plans for remaining independent and building retirement savings. We then compared the projected tax consequences of continuing as a sole proprietorship with electing to be taxed as an S corporation over the following three years.
The Strategy
Our analysis demonstrated that the potential tax savings associated with an S corporation could substantially exceed the additional administrative expenses. We also discussed retirement-plan options that could allow her to make larger contributions and continue pursuing a Roth-based retirement strategy as her income increased.
Proactive Tax Planning for a High-Income Couple
A high-income couple with W-2 wages and restricted stock had repeatedly faced large and unexpected tax balances. After relying on online tax-preparation software, they contacted Rapacki + Co. for proactive guidance and a clearer understanding of how stock compensation affected their federal and Minnesota income taxes.
Our Year-Round Tax Planning
We monitored the couple’s year-to-date income quarterly and reviewed the tax implications as restricted stock and other compensation became taxable. This year-round process allowed us to estimate their potential liability, explain how additional income affected their marginal tax rates, and recommend appropriate estimated tax payments.
The Strategy
With better information and scheduled estimated payments, the couple was able to prepare for their tax obligations throughout the year instead of facing another significant balance at filing time. Ongoing monitoring also helped them understand how compensation decisions could affect their federal and state tax brackets.
Tax Analysis for a Potential Rental-Property Purchase
A couple was considering purchasing a four-unit rental property and wanted to understand how the investment could affect their taxes. Before making the purchase, they contacted Rapacki + Co. to evaluate potential deductions, depreciation, and the tax treatment of rental-property income and losses.
Our Real Estate Tax Analysis
We reviewed the couple’s existing tax situation and explained eligible rental-property expenses, depreciation, and passive-activity loss rules. Because both individuals earned higher incomes in technology-related careers, we also discussed how income limitations and real-estate-professional requirements could affect their ability to deduct potential rental losses.
The Stradegy
After reviewing the financial and tax considerations, the couple decided that the multi-unit property did not align with their circumstances. They instead began exploring vacation properties with potential rental income. The analysis helped them avoid making a major investment without first understanding its likely tax consequences.
