Highly Income Clients

📘 Module 5: High-Income Clients & Tax Planning

Helping Clients Keep More of What They Earn

👋 Welcome to Module 5!

In this module, you’ll learn how to support high earners — clients making $100,000 or more per year — and help them reduce how much they owe legally using tax planning.

Many new tax preparers feel nervous working with “big money” clients. Don’t be! The goal is simple:

✅ Know what counts as taxable income
✅ Help reduce that income with strategies and deductions
✅ Avoid red flags that could trigger an audit
✅ Teach clients how to plan instead of panic

💸 What Counts as High-Income?

For this course, we define a high-income client as someone who:

Earns $100K or more in W-2 income
Is self-employed with large profits
Has multiple income streams (side business, investments, rental, etc.)

🔍 High-Income ≠ Rich

These clients often:

Are over-taxed because they don’t plan ahead
Owe large balances at the end of the year
Miss out on deductions because they don’t track expenses
Think they don’t qualify for credits (some still do!)

Your job is to help them keep more by planning smarter.

🧾 Common Problems High Earners Face

Problem	What You Can Do
Owing $5K+ in April	Recommend estimated tax payments quarterly
Losing credits like EIC or CTC	Suggest legal deductions to lower AGI
Too much taxable income	Use pre-tax strategies (401k, HSA, IRA)
Not tracking write-offs	Show them how to track business or itemized expenses

🔧 Smart Tax Reduction Strategies

These don’t require cheating, just smart planning:

✅ Max Out Pre-Tax Contributions

401(k), 403(b), SIMPLE IRA = lower taxable income
Health Savings Account (HSA) = tax-free medical savings
Traditional IRA (if eligible)

✅ Track Legit Deductions

For self-employed or side business:

Home office
Cell phone & internet (portion)
Travel & business meals
Software, gear, mileage
Health insurance (self-employed only)

✅ Invest in Their Own Business

Spending money on things like marketing, tools, or training before year-end can lower profits and reduce taxes.

🧠 Tax Planning = Year-Round Thinking

Teach your high-income clients to:

Track income monthly, not just at tax time
Use apps to log expenses (QuickBooks, Wave, etc.)
Make estimated payments quarterly to avoid surprises
Save for taxes in a separate account

Tip: If a client owes more than $1,000, they should be making estimated payments.

📝 Client Example: Jasmine the Nurse

Jasmine makes $112,000 from her full-time job and $15,000 from travel nurse gigs (1099). She usually owes taxes every year.

What can you do for Jasmine?

✔ Suggest putting $22,500 into her 401(k)
✔ See if she qualifies for a Traditional IRA
✔ Help her track travel nurse expenses on Schedule C
✔ Recommend setting aside 25–30% of her 1099 income for taxes
✔ Set up estimated tax payments to avoid a big April surprise

✅ Module 5 Activity

Client Practice:

Client: Malcolm

Full-time W-2 job: $88,000
Part-time 1099 tech side hustle: $35,000
No retirement savings
Paid $4,800 out-of-pocket for medical bills
Feels overwhelmed at tax time

Instructions for students:

What suggestions would you make to reduce Malcolm’s taxable income?
Which deductions or contributions could help?
Would you recommend estimated payments?

📝 Module 5 Quiz

1. Which of the following reduces taxable income for a high-earner?
A) Spending more money randomly
B) Claiming EIC
C) Contributing to a 401(k)
D) Ignoring their side hustle

2. True or False: High-income clients can't qualify for any deductions.
A) True
B) False

3. A client owes $8,000 every April. What should they be doing?
A) Claiming more kids
B) Making quarterly estimated tax payments
C) Filing late
D) Earning less

4. Which of these is a good tax strategy for self-employed clients?
A) Cashing out retirement
B) Paying employees under the table
C) Tracking mileage and business expenses
D) Hiding income

5. What’s one risk of not planning ahead for taxes?
A) Bigger refund
B) Surprise tax bill or penalties
C) More write-offs
D) Automatic forgiveness

✅ Answer Key: