Q: What does the gray portion of the Tax Map represent?
A: The gray portion of the Tax Clarity® Tax Map represents the effective marginal rate (EMR). If you are looking at the “Rate on the next dollar of ordinary income” map, the software indicates at each ordinary income dollar (i.e. IRA distribution, pensions, earned income, etc.) how that ordinary income dollar and other income (Social Security, capital gains, self-employment, etc.) will be taxed. In other words, the software assesses what is being taxed at that ordinary income dollar amount and adds all of the taxation together. That is why the EMR may be higher than the ordinary income or capital gains tax bracket at certain times. The gray portion of the Tax Map allows you to determine just how many ordinary income or capital gains dollars, such as qualified dividends, your client will have before triggering another taxation point.
Q: Where do I place a line item from a tax return?
A: In Tax Clarity, you will see a question mark next to each input field. When you hover over the question mark or click inside that input field, you will see further instructions on what, and how, to place data in that area.
Q: How do I create more than one scenario?
A: Every time you click the “save” button in Tax Clarity, the previous scenario is replaced by the new scenario. In our software, you have two ways to create additional scenarios. One way is to:
- Download and save a generated PDF with the base case and name it [client name] scenario 1.
- Return to the map and generate another scenario and save as [client name] scenario 2
The other way is to create more than one “client”with different names, i.e. Bob Jones 1 and Bob Jones 2.
Q: I am not as well-versed in taxes as I thought I was. Where can I get more training?
A: Log in to Tax Clarity and click on the menu heading “Settings” then click on “Training.” You will see a series of videos and a guide that you will have access to both during your free trial and while your paid subscription is active. Additionally, the IRS website is a good resource with great video tutorials, and of course, you can always call our expert support team at 877.844.7213.
Q: I have my base case, now what?
A: Tax Clarity is a tool that helps you to determine your clients’ tax limits. In other words, by viewing the Tax Map, you will have an idea of what financial decisions to test in order to determine the least tax liability. You will see if your client lands in front, on, or beyond a particularly high EMR (gray spike). Also, consulting with your clients to determine their upcoming plans and reviewing your client’s other financial information, such retirement accounts or stocks, will allow you to determine which options are the most tax-efficient, for example a Roth conversion or realizing capital gains.