Cambridge Tax Solutions Inc.
is dedicated to providing the highest quality service to our clients

Areas of Practice

Why is it so important to have a Trust?

Aside from avoiding probate, a trust becomes part of the estate plan, which will establish the following:

  1. Designated beneficiary(s)
  2. You control how your assets are distributed
  3. Medical and financial powers of attorney
  4. If children are involved, the Trust names the guardian(s)
  5. If substantial wealth is involved, you may need one or more trusts to help control how your assets are taxed, managed and distributed

There are many types of trusts. To find out which one fits your needs, CONTACT US so that our in-house estate planning attorney can help you decide what type of trust is best for you or if more than one trusts is recommended.

Retirement Plans

When dealing with retirement, most Americans usually consider the conventional retirement plans, such as IRA’s, 401(k)s, Roth IRAs, etc.

Most Americans focus on receiving an additional source of income once they retire, knowing that they cannot live on social security alone. But what about an accident that ends one’s life? Do you know what happens to your retirement plan?

Worse yet, what happens if the married couple lose their lives simultaneously? What happens to the retirement plan? As indicated above in the trust section, all of your assets will go to a probate court for valuation and taxation. No one wants this – see the section entitled “Trusts”.

Most taxpayers are very familiar with the IRA/401(k) plans and contribution limits, but how many are fully aware of the impact of the following events on their plans:

  1. Taxes
  2. Bod market swings – remember the 2008 economic downswing
  3. Early distribution penalties (10% excise tax)
  4. Creditors. If you are a California residence, and for some unforeseen reason you have to declare bankruptcy – the court can take 90% of the value of the plan to pay creditors.
  5. Most retirement plan holders forget that when distributions begin, they will be subject to a minimum 45% tax rate.

It is vital that every individual know exactly what their retirement plan will provide for them. Let’s chat and see what other options are available which have not been considered. See the section entitled “Transition Retirement Plans into tax free vehicles” .

Estate Planning

Estate planning is the act of preparing for the transfer of a person’s wealth and assets after his or her death. Assets, life insurance, pensions, real estate, cars, personal belongings, and debts are all part of one’s estate plans must be written, signed, and notarized by the person who owns the estate. it is important to know the meaning of the words used to define estate planning:

  1. Wealth is a measure of financial resources.
  2. Real estate refers to land, as well as any physical property or improvements affixed to the land, including houses, buildings, landscaping, fencing, wells, etc.
  3. Debt is an amount borrowed.
  4. Estate is all of an individual’s property and financial assets and liabilities at the time of his or her death.
If your estate plan is correctly written, then your plan should provide you with:
  1. Asset Protection
  2. Consolidation of all assets into the estate
  3. Minimize/Overcome estate taxes
  4. Distribution of assets according to the will/trust
By way of example, let us consider the benefits of a Protected Savings Plan, which is also used for creditor protection:
  1. Assets held within the plan are creditor protected by California Statutory law even if your residency is in another state
  2. Assets may be protected from business and personal creditors, including bankruptcy
  3. Distributions from the plan are exempt from levy except for child and spousal support obligations
  4. Assets purchased by the client using Protected Retirement Plan distributions are exempt from creditors provided the payments are traceable back to the plan trust
  5. You can contribute virtually any amount to the Trust Plan even if you currently participate in a qualified retirement plan
  6. When you fund the trust with life insurance , the assets grow tax free
  7. You can select the type of benefits provided through flexible funding options
  8. Heirs can receive the death benefit proceed income and estate tax free, provided the Trust is structured properly

In addition, the Protected Savings Plan (PSP) exempts up to 1 (one) million dollars from the bankruptcy estate for IRAs.

Who is a good candidate for a PSP?

A Protected Savings Plan is a specifically designed, non-qualified, savings trust established by an employer for use by the employee – employee may own the business. Entrepreneurs and businesses with “inherent risks” such as individuals with income above $196,000 who could not use a Roth IRA, business owners who cannot fully insure business or personal risks or individuals looking for a non-qualified supplements to qualified plans.

Benefits of the plan:
  1. No limits as to the amounts that can be placed in the Plan
  2. No limitations as to use, such as with ROTH IRAs, qualified plans or other retirement vehicles
  3. Plans can be customized
  4. Plans can be self-directed
  5. No penalties for early withdrawal
  6. Plans can discriminate
  7. Plans can grow tax-free and distributed tax free
Protected Savings Plan:
  1. Must be used primarily for retirement savings
  2. Funds are periodically placed into the Plan on an after tax basis
  3. The Savings Plan is protected from creditors under California law
  4. Life insurance is used to fund Plan and distributions are tax free
  5. Can be used to pay medical and disability expenses
  6. Not under ERISA (Employee Retirement Income Security Act) rules
  7. Retirement plan completes in the event of premature death

Estate planning is not simple, but necessary, if you want to protect your wealth and the transfer of wealth to your heirs. There are other plans and transition vehicles with major tax savings. See the section entitled, “Transition retirement plans”.

Premium Financing

For many high net worth individuals, life insurance can offer favorable tax benefits. Life insurance can be used for estate planning or business succession planning. However, it is little known that life insurance policies with sizeable premiums can create liquidity.

Borrowing strategically, as part of your comprehensive wealth plan can align with your financial goals. Life insurance premium financing can help preserve your current standard of living since you do not have to access your cash flow to make large premium payments.

Additionally, life insurance premium financing, may provide a tax free benefit that is not included in your estate and further protects your net worth by facilitating a transition of your financial legacy to future heirs.

Estate planning is essential if your a re a successful entrepreneur and you truly care about your heirs. If this is something that seems interesting to you, please send us an e-mail to set up a time and date to discuss this fully.

Transition Retirement Plans into Tax Free Plans

Very few CPA firms are interested in your personal financial situation/investments. We on the other hand, feel a sense of responsibility to communicate with our clients all of the benefits that are available to them and which are seldom/never discussed. Given the nature of our “all under one roof” concept, Cambridge Tax Solutions, Inc.we can with confidence represent the programs listed herein with confidence. If interested, we will disclose all the intricacies of the programs and the personal that will work with you throughout the process.

Let’s discuss a couple of programs that may interest you:

Life Insurance Retirement Plan (LIRP)

Historically, LIRP has been reserved for the wealthy. It is estimated that 85% of the CEO’s of the Fortune 500 companies use it as do members of congress. It wasn’t until recently that companies began to re-engineer these programs to mimic the ROTH IRA. They capture the low cost maintenance with the tax free benefits of a ROTH IRA.

LIRP uses indexing as a “method that enables policy holders to participate in a portion of the potential rise in the value of the stock market index, while being protected from a potential drop in the index’s value. One common index that is used is the S&P 500 with caps anywhere from 17% and floors set at 0%. YOU DO NOT LOSE MONEY TO STOCK MARKET VOLATILITY.”

The LIRP is a life insurance plan specifically designated to maximize the accumulation of cash within the policy’s growth account. The LIRP has no:
  1. Contribution limits
  2. Income limits
  3. Legislative risks
  4. The plan has multiple accumulation strategies:

Insurance Company Investment Portfolio: Historically, life insurance companies have been quite conservative in their investing activities, they are conservative but very consistent

Stock market:
Pass contributions through insurance companies into mutual fund portfolios called sub-accounts

Index Growth:
Linked to the stock market S&P 500. Capped rates between 13% to 15%. If the index losses money, the account is credited zero – meaning no losses since your investment never goes down.
Historical return are between 7% to 9%

Long Term Care:
When LIRP is used to cover LTC, you still pay for the coverage, but if you die never having use it, the heirs will receive this amount as a tax free death benefit.

Qualified Reset:
If you ask any deferred qualified retirement plan owner how much they have in their IRA, they will inevitably tell you the total amount reported in their earnings statement. But is this true? No because the real value is the net payout after taxes which could be 40 to 50 percent less. This is what the Qualified Reset can do for you:
  1. Process repositions your TAXABLE assets to TAX-FREE assets
  2. Policy Loans used to pay Uncle Sam continue to accumulate index credits
  3. eset plan is similar to ROTH conversions, but without the out-of-pocket costs
  4. Reset plan is guaranteed against market losses and “locks in” gains each year—unlike the IRA
  5. Reset plan income is essentially immune from tax hikes (non-reportable income!)
The Qualifies Reset systematically transfers IRA assets to cash accumulation life insurance over 3 to 5 years. Taxes are paid internally by participating interest policy loans. This results in:
  1. Tax-free guaranteed retirement income
  2. Tax-free long term care coverage
  3. Tax-free wealth transfer upon death

Qualified Retirement Conversion (QRC)

What can we do for high net worth clients? Let us consider the “Qualified Retirement Conversion”

This is an option that can significantly reduce the tax impact on qualified plans. The QRC offers the following benefits:

  1. Transition taxable asset to a tax-free asset without incurring out-of-pocket costs
  2. Seasoned Qualified Assets can be repositioned into a specific plan that allows for the purchase of life insurance
  3. Funds are transitioned into the life insurance plan over 5 years and the taxes are paid internally with no out of pocket costs
  4. Assets are now tax free for income or wealth-transfer purposes, keeping Uncle Sam away from your retirement party
The ideal QRC candidate has:
  1. Qualified plan assets of $1,000,000 plus, and
  2. Total net worth of $5,000,000 plus

Other assets can also be used to either leverage or pay the tax on the Roth IRA conversion.

Roll Over as a Business Start-up (ROBS)

Another option that is seldom used is the Roll Over Business Start-up. This tax savings model allows you to roll over your IRA or conventional 410(k) plans into a Profit Sharing Plan (which is still a 401(k) plan). This offers you the opportunity to make some simple transactions to obtain cash flows into your company tax free.

These are just some of the options of many that can be offered to any interested party. Please feel free to e-mail us if interested.

Tax Preparation

When most Americans think of tax preparation, they think about H&R Block, local preparers and those businesses with chickens out in front of the office hailing them to come in and have their taxes prepared. Cost is the issue.

However, in the complex environment of business taxation and savings, it is essential that every taxpayer find a CPA that will use the IRS regulations to the fullest extent to lower their tax burden. The current tax bill, (Tax Cuts and Jobs Act) is a 1,097 page document. Once this law is translated into regulations, the regulations could be over 3,000 pages.

With almost every tax change comes limitations, restrictions and a variety of compliance rules to qualify for the new tax change. It is imperative that every tax professional become aware of these restrictions and limitations before a business or personal return is prepared. Our firm is dedicated to making sure that every applicable deduction is captured for the benefit of the taxpayer.

It is our firm’s policy to always offer tax planning before year end to assure that we have considered all of the allowable deduction specific to the taxpayer’s business. Like most CPA firms, we prepare individual (Form 1040), Partnership (Form 1065), LLC (Form 1065), Corporate (Form 1120), Subchapter “S” (Form 1120S), Trust Returns (Form 1041), Decedent’s Estate Taxes (Form 706) and Gift Tax Returns (Form 709).

Not all CPA’s are created equally. Give us a call so that we can present to you every aspect of tax planning, savings, asset protection and estate planning.

IRS Representation

Have you ever wondered why the IRS Resolution TV ads always ask, “if you owe more than $10,000 to the IRS, give us a call’? Well, the reason is obvious, you have money and they want it.

There are no short-cuts in dealing with the IRS collections agents. They are tough and want to get as much money out of you as they can – that is how they are evaluated when promotions and pay raises come along.

Anyone, and I mean anyone, that contacts the IRS collections has to follow a set of procedures that are never deviated from – no matter who you are. If you want to enter into an installment payment agreement, because you owe the IRS a large amount, then you have to fill out IRS Form 433A. There is no other way to obtain an installment agreement – none. If you owe lesser amounts, you can go to the IRS website (irs.gov) and fill out an installment agreement without the help of anyone.

I have personally represented well over 150 clients before the IRS and I want to share with you what I learned:

  1. Never go before the IRS without a legal representative
  2. Respond to any IRS Notice immediately
  3. If you receive an IRS Audit Notice – call me immediately
  4. If you decide to represent yourself because you have not done anything wrong – make sure you know all the IRS regulations before you start chatting with the agents
  5. IRS agents are trained into trapping taxpayers into the holes (reasons) that you are being audited
  6. When you provide information to the IRS, make sure you only give them what they asked for – nothing else
  7. If you enter into an installment agreement, make sure that you can honor it, if you miss a payment, you may have to start all over again
  8. Always ask to have interest and penalties removed, if they can

We can help you with IRS installment agreements, Offers in Compromise, IRS audits and any and all responses to notices from the IRS or the State.

Remember, there are no short cuts, no backend deals that can be done with collection agents or any reductions because you called into and TV Ad which promised you results that they cannot obtain.

Any IRS collection or audit notice is should be addressed immediately. If you received one, call us for a free consultation. Let us worry about the IRS.