Tax Strategies | U.S. Dollar in Global Markets & Your Legacy

Tax Strategies Every Business Owner Needs

Inconsistent income is a common experience if you own a business. Income fluctuates in both directions–sometimes planned, sometimes not. This time of year, tax returns can remind us of how tax planning requires more attention and creativity than most W-2 returns.

If you’re in this camp, there are three things we want all of our entrepreneurial clients to be thinking about in terms of volatile income years:

High-profit years are optimal times to shelter income. 401(k) plans, SEP IRAs, and other vehicles are great for these functions.
Low-profit years are best for Roth conversions. Low tax bracket years may present a valuable opportunity to convert pre-tax dollars into Roth accounts, allowing you to strategically reduce future tax impact.
Tax planning is not an annual project. We never want to get tunnel vision on the “lowest tax bill this year.” Play the long game, and ride out the income fluctuations in the context of your broader plan.
All year, we welcome these conversations to help position you for optimized tax planning.

The U.S. dollar in the Global Market: Among other things, this past week was a reminder that despite many years of the U.S. dollar and its government securities being the world’s bedrock safe haven assets, things may not be as safe as they seemed.

In the big picture, the shifts in the global trade order that happened on April 2 and the surrounding days, typically play out over years. One of the unique features of the situation was the way bond and currency markets interacted with it. In a week that risky assets sold off, so did U.S. Treasury bonds and the U.S. dollar. This isn’t normal.

The yield on the 10-year U.S. Treasury note closed the week at 4.5%, up half a percent from a week earlier. That level is not worrying (rates were higher as recently as January) but the speed and direction of travel are.

That said, markets can act strangely and then will typically adjust. But the world’s most important financial markets—for the dollar and Treasury securities—are signaling that something fundamental is shifting beneath our feet.

Timely Reminder in the Midst of Troubled Markets:

Joshua Brown in “You Weren’t Supposed to See That” wrote:

“Pessimism is intellectually seductive, and the arguments always sound smarter, especially when they dovetail with our own worries. You think this period is more frightening than the 16-month recession between July 1981 and November 1982 only because you weren’t there, and you haven’t studied history. Your frame of reference is here and now, not then—with a 14% unemployment rate and 15% inflation. As Peter Lynch reminds us:

“Sensible professionals wondered if they should take up hunting and fishing, because soon we’d all be living in the woods, gathering acorns. Then the moment of greatest pessimism, when eight out of ten swore we were heading into the 1930s. The stock market rebounded with a vengeance and suddenly all was right with the world.

“That’s what usually happens.”

Leaving a Legacy: We all think about and approach the thought of legacy a little differently. It’s unique to our personality and what we find valuable in life. What if you had to choose one memento for your children or family to remember you by? What would it be? This recent Wall Street Journal article caught our attention with this very conversation. Legacy goes far beyond the financial resources you may pass on to the next generation.

*The views expressed represent the opinions of Compass Ion Advisors, LLC, as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website at https://adviserinfo.sec.gov/firm/summary/166418. Past performance is not a guarantee of future results.