Financial pioneering: tax planning in an uncertain environment.

• Author: DeRosa, Gina L.

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It could certainly be argued that every generation has lived in uncertain times, but today feels more uncertain than ever. World financial markets are in an uproar, our planet is throwing us environmental curveballs and our country is at a crossroads, both politically and socially.

So, how do we advise our clients without a crystal ball?

The basic tenets of tax planning still exist: Defer income, accelerate deductions and take advantage of all available tax credits.

Deferral of Income

Saving for retirement is still the easiest way to defer taxable income and is unlikely to come under attack by politicians. Clients who are employees can defer income by contributing to 401(k) and 403(b) plans, often while receiving "bonus" matching contributions from their employers.

Self-employed clients have a myriad of retirement saving tools at their disposal: SEP plans, "solo" 401(k) plans, profit sharing plans and defined benefit plans, to name a few. Defined benefit plans offer the opportunity for business owners who are significantly older and more highly compensated than their employees to contribute more for the owner's benefit based on age and earning history (see "Pension Tension" by Daniel R. Bennett and Glen A. Michel in the September 2015 issue of California CPA).

When advising clients, don't forget traditional and Roth IRAs. We often overlook IRA opportunities because our clients "make too much" or are covered by other retirement plans. Non-deductible traditional IRA contributions do not provide any current tax savings, but their tax-deferred growth can be extremely valuable in the future, especially if the client is in a lower tax bracket during retirement. Also, for clients with little or no IRA assets, those non-deductible IRA contributions can be rolled into Roth IRAs, often with no tax or penalty, and grow tax- and RMD-free for years.

Many of our clients' employers also offer deferred compensation plans, which should always be evaluated. Clients often feel that deferring income in addition to making retirement plan contributions will have too great an impact on their cash flow, but for those in the highest tax brackets the deferral may not hurt as much as they think.

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Clients who plan to work outside of the United States for an extended period of time may be able to exclude up to $101,300 of 2016 income from U.S. taxation. While not a deferral method, the Foreign Earned Income Exclusion is an...