Tag: #TaxPlanning

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2025 Required Minimum Distribution Deadline is Near – What You Need to Know Right Now

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This is the time of year to start planning for RMDs unless you are taking them automatically. If you haven’t taken an RMD in 2025 and don’t need funds to cover living expenses, you may want to wait until December. That’s because if your RMD covers your entire tax bill, you can avoid quarterly estimated tax payments by taking the RMD in December and having your financial institution withhold a sufficient amount.

This is something most people don’t know. You can take your RMD and tell the brokerage house or advisor to withhold any amount. If the RMD is enough to cover quarterly estimated tax payments, you don’t need to make them, and the withholding on the RMD will cover the payments without penalty.

Here’s an example: Let’s say you’re required to make four quarterly estimated tax payments of $2,500 each. Your Required Minimum Distribution (RMD) for the year is $15,000. You can instruct the financial advisor to withhold $10,000 in addition to the tax due on the RMD. As a result, you will no longer need to make quarterly estimated tax payments. This allows your assets to remain in the IRA, maximizing your compound interest, which continues to grow tax-free.

Here’s why this works:

Tax-deferred retirement accounts, like traditional IRAs and 401(k)s let wage earners save pre-tax dollars. In exchange, workers pay income tax on the withdrawals and any future growth.

But you can’t keep money in tax-deferred accounts forever. That’s where the RMDs come in. They ensure Americans don’t keep saving tax free. After you reach a certain age, you are required to take a portion of the balance every year. If you fail to take your RMD in any year, you pay an excise tax equivalent to 25% of the monies you failed to take out. That’s a hefty penalty.

RMDs have to be taken out before December 31 every year. The first RMD is the only exception, you can take that out up to April 1 of the following year.

There are a few strategies for taking RMDs, with benefits and drawbacks.

Those who own traditional retirement accounts have three options:

  • Take the money early in the year.
  • Make withdrawals as periodic installments.
  • Take lump sum at the end of the year before December 31.

It all depends on your personal circumstances and preferences. But there are pros and cons to each choice.

Take a lump sum early in the year and you don’t have to think about it again. But you miss out on any growth in a tax- deferred investment, and you’ll need to make an estimated tax payment for the quarter.

Take it out throughout the year and you’ll enjoy regular cash flow. This makes sense if you make quarterly tax payments, since you can time the RMD to cover the expense. There is a downside: you’ll have to make multiple estimated tax payments, one for each quarter when money was withdrawn. Miss a deadline and you’ll get hit with an interest charge.

Taking a lump sum late in the year allows you to skip having to make estimated quarterly tax payments and maximize the tax-deferred growth. If you don’t need the cash to pay expenses, this can be a good solution. But there’s a downside here too: if you forget to make the withdrawal in time, you’ll pay a penalty. And if the market dives during December, you may have to sell investments on the low side to gather cash for a withdrawal.

Which choice is best depends upon your personal situation, but most people don’t know about using RMDs to cover quarterly estimated tax payments. If you want to explore this, call me and I’ll be happy to discuss it in detail.

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Reference: yahoo! finance (September 21, 2025) “The 2025 Required Minimum Distribution (RMD) Deadline Draws Near. Should Retirees Make Withdrawals Now or Wait Until December”

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Reading the Small Print in the Big, Not So Beautiful Bill: Why Businesses May Flee New York

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Attorneys and business owners across New York are sounding the alarm over a little-discussed provision buried in the latest Republican-backed tax proposal, sometimes dubbed the Big Beautiful Tax Law. While much of the bill serves as a continuation or expansion of the 2017 Tax Cuts and Jobs Act (TCJA), an important provision threatens to reverse a critical tax relief mechanism for high-income earners and pass-through businesses: the elimination of the Pass-Through Entity Tax (PTET).

If passed, this change could dramatically increase tax liabilities for partnerships, LLCs, S-corporations, and sole proprietors across the state—and push some of them out of New York altogether.

What Is the PTET and Why Does It Matter?

The Pass-Through Entity Tax (PTET) is a state-level workaround to the TCJA’s $10,000 cap on the federal deduction for state and local taxes (SALT). For high-income individuals and business owners in high-tax states like New York, this cap caused significantly higher federal tax bills.

States, including New York, adopted the PTET to mitigate the financial blow. Instead of taxing income at the individual level—where the SALT deduction cap applies—pass-through businesses elect to pay the state income tax at the entity level. Because federal law allows for full deduction of state taxes paid by a business entity, the PTET lets business owners bypass the SALT cap entirely.

For many, this tax structure has meant tens or even hundreds of thousands of dollars in savings each year.

Who Uses the PTET?

The PTET primarily benefits “pass-through entities”—business structures where profits and losses are passed directly to the owners’ tax returns rather than being subject to corporate taxation. The entities include:

  • Sole Proprietorships
  • Partnerships
  • S-Corporations
  • Limited Liability Companies (LLCs)

In particular, professional services firms, investment management partnerships, and other high-income, partnership-based businesses have leaned heavily on the PTET in the wake of the SALT cap. The structure has become vital for New York City-based law firms, accounting practices, medical partnerships, and financial advisory groups—many of which already pay New York City a 4% unincorporated business tax (UBT).

The Proposal: Ending the PTET

The new tax proposal’s quiet but seismic move to eliminate the PTET concerns many in the business and legal communities. While expanding TCJA provisions might be a political victory in Washington, eliminating the PTET threatens to devastate businesses in high-tax states.

Repealing the PTET could increase federal tax liabilities for New York State pass-through entities by as much as $5 to $6 billion yearly. Much of this burden would fall on service-oriented partnerships and high-income professionals already under pressure from inflation, rising rents, and local tax obligations.

A One-Two Punch for NYC Businesses

The blow could be even more acute for businesses operating in New York City. The proposed changes also seem to eliminate the ability to deduct New York City’s Unincorporated Business Tax (UBT), a 4% tax imposed on income from trades or businesses carried on by individuals, partnerships, or unincorporated entities.

This double hit—removal of the PTET and loss of deductibility for the UBT—could result in a staggering 50% increase in effective federal tax liability for some NYC-based businesses.

Will Businesses Leave New York?

In short, many may have no choice.

New York already ranks among the highest-taxed states in the country. Without the PTET to soften the blow of the federal SALT cap, many business owners will consider relocating to lower-tax jurisdictions such as Florida, Texas, or Tennessee.

For mid-sized firms and partnerships, the costs could outweigh the benefits of staying. And while moving an entire business operation isn’t a light decision, virtual work environments and remote client servicing have made relocation far more feasible than in earlier decades.

Estate Planning Implications

From an elder law and estate planning perspective, this change has significant downstream effects. Many business owners structure their estate plans with pass-through entities, family limited partnerships, and LLCs that rely on favorable tax treatments like the PTET. The sudden loss of that tax benefit could:

  • Reduce the net income available to fund trusts.
  • Decrease the long-term value of family-owned businesses.
  • Complicate succession planning
  • Force the sale or restructuring of assets.

For high-net-worth individuals preparing for retirement, long-term care, or generational wealth transfer, these are not minor issues. Planning strategies that were sound just a year ago may no longer be viable under the new tax regime.

A Call to Action: Watch Albany and Washington Closely

New York’s political leadership has already expressed serious concerns about the bill’s SALT-related provisions. Lawmakers know that repealing the PTET is not a partisan issue—it’s an existential one for the state’s economy. The stakes are high not just for Wall Street but for thousands of small and mid-sized businesses that drive the regional economy.

What Can You Do Now?

If you own a pass-through business in New York—or if you represent one—it’s time to act:

Review Your Business Tax Structure
Consider how the loss of the PTET would impact your entity’s tax obligations. Would restructuring as a C-corporation offer better protection? Would relocation reduce your overall liability?

Evaluate Estate Planning Strategies
For business owners using LLCs or partnerships in their estate plans, revisit those documents with a qualified estate planning attorney.

Plan for Multiple Scenarios
Work with estate planning counsel to model different outcomes and prepare for what may come.

Whether you’re a business owner, a professional partner in a law or medical practice, or someone thinking about retirement and asset protection, the time to prepare is now. We’re closely tracking this evolving situation and are here to help clients navigate the potential fallout.

Have questions about how these changes might impact your business or estate plan? Contact our office today for a consultation.