CASE DESIGN

Expertise you won't find on Main Street  

HVAC BUSINESS OWNER

Background A client operated a successful HVAC business for many years. The business generated approximately $300,000 in cash flow and was in a C-Corporation. Like many C-Corporations we come across, the prior “strategy” was to pay the profit out in W-2 wages to avoid double taxation, while overpaying FICA. The client was paying approximately $116,000 in income tax and FICA tax each year.  

Fortunately, they called one of our Managing Directors at Redwood Tax Specialists! 

The Plan The client wanted a 5-7 year exit strategy and is extremely conservative and wanted fixed/guaranteed options for any retirement balances. Based on the client’s preferences, cash flow needs, and budget, we designed their custom tax plan with:

  • reduced W-2 wages to $80,000 per year with a compensation study, cutting FICA tax in half
  • implemented a retirement plan contributing $200,000 annually, of which 90% of that amount was for the owners’ benefit
  • optimized the corporate structure to reduce rates and avoid double taxation
  • created a retirement savings plan and exit strategy utilizing fixed return and guaranteed options to achieve the retirement goals, while eliminating risk
  • implemented an insurance strategy through the business to make the payments tax-deductible


The Results Combined Federal & State taxes were reduced from $116,000 per year to:  

 2016 – $83,026  

2017 – $45,626  

2018 – $11,027

  In only three years, the client’s net worth increased by over $200,000, with zero investment risk, the client has a guaranteed lifetime retirement income benefit in excess of what they previously thought was unreachable. The client is in a position after only three years to retire comfortably, compared to their desired goal of 5-7 years that was unreachable under their previous plan, and the client has been taking the opportunity to travel the world with family, now that there is a clear path forward.

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