Warren Tax Planning

Quarterly Estimated Tax Calculation

Each quarter, Warren recalculates estimated tax payments:

Inputs

1. YTD income by source (from Income Tracking Agent)
2. YTD withholding (from W-2 income)
3. Prior year tax liability (from Financial Profile)
4. YTD estimated payments already made
5. Projected annual income (extrapolated from YTD + known future income)

Calculation Framework

Federal Estimated Tax:

1. Project annual taxable income:

   • Total income
   • Minus above-the-line deductions (1/2 SE tax, retirement contributions, HSA)
   • Minus standard deduction or itemized deductions = Taxable income

2. Apply federal tax brackets to projected taxable income

3. Add self-employment tax (15.3% on 92.35% of SE income, up to SS wage base; 2.9% Medicare on all SE income; 0.9% additional Medicare if over $200K)

4. Subtract credits (if any)

5. = Projected total federal tax liability

6. Subtract YTD withholding and estimated payments

7. = Remaining liability, divided by remaining quarters = quarterly payment

California Estimated Tax:

1. Similar framework using CA tax brackets
2. CA does not have a standard deduction equivalent to federal (uses smaller CA standard deduction)
3. CA taxes LLC income and charges annual LLC fee ($800 minimum + gross receipts fee if applicable)
4. CA Mental Health Services Tax: additional 1% on taxable income over $1M

Safe Harbor Check

• Federal: If prior year AGI > $150K, safe harbor = 110% of prior year tax
• California: Same thresholds apply
• Warren checks whether cumulative payments (withholding + estimates) meet safe harbor at each quarter

Deduction Tracking

Warren maintains a running total of tax deductions by category:

Deduction Dashboard

DEDUCTION TRACKER — 2026 YTD

ABOVE-THE-LINE DEDUCTIONS
| Deduction | YTD Amount | Projected Annual | Notes |
|-----------|-----------|-----------------|-------|
| 1/2 Self-Employment Tax | $X | $X | Auto-calculated |
| Retirement Contributions | $X | $X | [account type] |
| HSA Contributions | $X | $X | If applicable |
| Student Loan Interest | $X | $X | If applicable |

ITEMIZED DEDUCTIONS (if itemizing)
| Deduction | YTD Amount | Projected Annual | Documentation |
|-----------|-----------|-----------------|---------------|
| State/Local Taxes (SALT) | $X | $X | Capped at $10K |
| Mortgage Interest | $X | $X | 1098 |
| Charitable Giving | $X | $X | Receipts needed |
| Medical (above 7.5% AGI) | $X | $X | If applicable |

BUSINESS DEDUCTIONS (Schedule C or via AiTheia)
| Deduction | YTD Amount | Projected Annual | Documentation |
|-----------|-----------|-----------------|---------------|
| Home Office | $X | $X | Square footage calc |
| Business Travel | $X | $X | Receipts + purpose |
| Business Meals (50%) | $X | $X | Receipts + attendees |
| Professional Development | $X | $X | Receipts |
| Office Supplies/Equipment | $X | $X | Receipts |
| Professional Services | $X | $X | Invoices |
| Technology/Software | $X | $X | Receipts |
| Vehicle (Business Use) | $X | $X | Mileage log |

STANDARD vs. ITEMIZED COMPARISON
- Standard Deduction (2026): $[amount based on filing status]
- Total Itemized Deductions: $X
- Recommendation: [Standard / Itemized]

Year-End Tax Optimization

Starting in October, Warren reviews optimization strategies:

Common Strategies

1. Retirement contributions: Max out 403(b), IRA/Roth IRA, Solo 401(k) or SEP IRA through AiTheia
2. Charitable giving: Bunching strategy, donor-advised fund, appreciated stock donations
3. Income timing: Defer invoicing to January if beneficial, or accelerate if next year's rate is higher
4. Expense acceleration: Prepay deductible expenses in December
5. Tax-loss harvesting: Sell losing investments to offset gains (coordinate with Investment module)
6. HSA contributions: Max out if eligible
7. Equipment purchases: Section 179 or bonus depreciation for business equipment

Year-End Checklist (October-December)

YEAR-END TAX OPTIMIZATION CHECKLIST

RETIREMENT
- [ ] Maximize 403(b) contributions ($23,500 in 2026, +$7,500 catch-up if 50+)
- [ ] Consider Roth conversion if in lower tax bracket this year
- [ ] Maximize Solo 401(k) or SEP IRA through AiTheia (if applicable)
- [ ] Review IRA contribution eligibility

CHARITABLE
- [ ] Review YTD charitable giving
- [ ] Consider bunching if near standard deduction threshold
- [ ] Evaluate donating appreciated stock vs. cash
- [ ] Ensure all donations have proper receipts/acknowledgment letters

INCOME MANAGEMENT
- [ ] Review AiTheia invoicing timing (defer or accelerate?)
- [ ] Estimate bonus or year-end distributions
- [ ] Review capital gains/losses for harvesting opportunities

DEDUCTIONS
- [ ] Prepay deductible expenses? (January insurance, memberships)
- [ ] Review home office calculation for accuracy
- [ ] Ensure all business expenses are logged and documented
- [ ] Review vehicle mileage log for completeness

COMPLIANCE
- [ ] Confirm estimated payments meet safe harbor
- [ ] Review withholding elections — adjust if needed for remainder of year
- [ ] Schedule CPA year-end planning call

CPA Coordination

Warren prepares materials for the CPA, not tax advice. The CPA is the licensed professional.

Warren's role: Organize data, flag questions, prepare packages. CPA's role: Apply tax law, make professional judgments, file returns.

When Warren encounters ambiguous situations:

• "This looks like it could be either a business expense or personal. Flagging for CPA review."
• "The deductibility of this home office arrangement depends on your specific situation. Your CPA should confirm."
• "This income timing strategy has implications I can't fully evaluate. Discuss with your CPA."

Data Sources

Tax planning draws from:

• 02-Personal-Finance/Financial-Profile.md — Baseline tax situation
• 05-Income/Income-Summary-2026.md — YTD income by source
• 04-Budget/Monthly-Spending/ — Categorized expenses for deductions
• 03-Tax/Deduction-Categories/ — Detailed deduction tracking
• 03-Tax/Quarterly-Estimates/ — Prior quarterly estimate calculations
• 03-Tax/Tax-Calendar.md — Deadline tracking