Tax Planning Strategies for Wells Fargo Employees 

Top 10 Tax Planning Strategies for Wells Fargo Employees

Working in the financial industry, Wells Fargo employees know better than most that planning ahead is key to making the most of their finances, but they are still not immune to overpaying in taxes.  That is why we pulled together tax planning strategies for Wells Fargo employees!

In 2020 alone, the IRS issued over 126 million refunds, accounting for 74% of all tax returns filed.1 At Calamita Wealth Management, we strive to ensure our Wells Fargo clients are getting the most out of their money and not paying more than they should. In this guide, we’ll explore the top 10 tax planning strategies for Wells Fargo that you can use to maximize your savings. 

1. Maximize Your Retirement Plan Contributions 

First, we will begin with one of our most important tax planning strategies for Wells Fargo employees. One of the best ways to minimize your tax liability is by maximizing your retirement plan contributions. 

  • Wells Fargo 401(k): This account allows for contributions up to $23,000 annually in 2024 ($30,500 if over age 50).2 Contributions are automatically deducted from your paycheck, meaning they won’t show up as part of your annual income. This is a great way to defer taxes until your retirement years when you could potentially be in a lower tax bracket. Wells Fargo also offers a dollar-for-dollar match up to 6% of your salary. That match up is an extremely attractive strategy for both retirement savings and tax minimization. 
  • Traditional IRA: Contributing to a traditional IRA is another way to reduce your taxable liability if your income is within certain limits.3 The 2024 contribution limit for Traditional IRAs is $7,000 with additional $1,000 catch-up contribution for individuals over the age of 50.4 Contributions can be made until the April 15th tax filing deadline. 
  • Roth IRA: This is a great savings vehicle for many reasons. This includes no required minimum distributions (RMDs), tax-free withdrawals after age 59½, and the ability to pass wealth tax-free to your heirs. Unfortunately, Roth IRAs have income restrictions and you may not be able to open an account outright if you are above certain limits.5

2. Utilize Roth Conversions 

If you are outside of the income eligibility threshold for Roth IRAs but still want to take advantage of the Roth tax benefits, a Roth conversion could be the right strategy for you. It works by paying the income tax on contributions to a traditional IRA, thereby converting the funds to a Roth IRA. This will allow the contributions to grow completely tax-free and allow you to avoid future RMDs, which is helpful if you expect to be in a higher tax bracket in the future.  

Another option is the mega backdoor Roth strategy in which you convert a portion of your 401(k) plan to Roth dollars. In this strategy, you would maximize your after-tax (non-Roth) contributions (up to $40,500 in 2022), then roll over this after-tax portion to the Roth 401(k) or your Roth IRA so that these dollars grow tax-free. Although after-tax (non-Roth) contributions are not permitted in the Wells Fargo 401(k) plan, be sure to check the rules for your spouse’s 401(k).   

3. Contribute to Your Wells Fargo Health Savings Account 

The Wells Fargo Health Savings Account (HSA) offers triple tax savings. You can contribute pre-tax dollars, pay no taxes on earnings, and withdraw the money tax-free to pay for medical expenses. Unused funds roll over each year and can be withdrawn without penalty for non-medical expenses at age 65, essentially becoming an IRA. You must be enrolled in a high-deductible health plan in order to qualify for an HSA.  

HSAs can be a great tax-management tool if you are able to pay medical expenses out of pocket and leave the HSA funds to earn tax-free growth. The 2024 IRS contribution limits for HSAs are $4,150 for individuals and $8,300 for families.6 If you are 55 or older, you may also be able to make catch-up contributions of $1,000 per year.7 You have until April 15th for your contributions to count for the previous year’s tax return.  

4. Contribute to a Donor-Advised Fund 

If you itemize your tax deductions because of charitable contributions, you may want to consider investing in a donor-advised fund (DAF). You can contribute a lump sum all at once and then distribute those funds to various charities over several years. With this strategy, you can itemize deductions when you make the initial contribution and then take the standard deduction in the following years. This allows you to make the most out of your donation tax-wise. 

You can also donate appreciated stock, which can further maximize your tax savings. By donating the appreciated position, you avoid paying the capital gain tax that would have been due upon sale of the stock. If you want to keep the position for the long term and avoid the capital gain tax, you can donate the stock and then repurchase it using the cash you would have otherwise contributed. This effectively resets your cost basis to the current price of the stock. It also allows you to delay taxes until the future.  

5. Make a Qualified Charitable Donation 

If you own a qualified retirement account and are at least 70½, you can use a qualified charitable distribution (QCD) to receive a tax benefit for your charitable giving. Since this is an above-the-line deduction, it can be used in conjunction with other charitable tax strategies. A QCD is a distribution made from your retirement account directly to your charity of choice. It can also count toward your RMD when you turn age 72; however, unlike RMDs, it won’t count toward your taxable income. 

6. Harvest Capital Losses 

Tax-loss harvesting involves selling investments at a loss in order to offset the gains in your portfolio. By realizing a capital loss, you are able to counterbalance the taxes owed on capital gains. The investments that are sold are usually replaced with similar securities. This is in order to maintain the desired asset allocation and expected return.  

Tax-loss harvesting can also be used to offset your ordinary income tax liability if capital losses exceed capital gains. In this case, up to $3,000 can be deducted from your income. Capital losses in excess of this amount can be carried forward to later tax years.  

7. Review Your Long-Term Incentive Compensation Plan 

Highly compensated Wells Fargo employees may have access to a long-term incentive compensation plan. These plans are often made up of awards, such as: 

  • Stock options 
  • Stock appreciation rights 
  • Restricted stock and restricted share rights 
  • Performance shares and performance units 
  • Stock awards

If you hold any of these, it is crucial to review the award details and vesting schedules thoroughly to minimize your tax liability. For instance, restricted stock units (RSUs) typically vest after a specific number of years. Upon vesting, the RSUs may be converted to stock and you will be taxed on the fair market value. This can push you into the next tax bracket and create a surprise tax bill if you don’t plan ahead. If you expect your RSUs to vest in the near future, deferring other income sources to a different tax year can help reduce your liability. 

8. Consider Estate Tax-Planning Techniques 

Estate planning techniques can also be an effective way to reduce current-year tax liability. The gift and estate tax and exemptions have been increased to $13.61 million for individuals and $27.22 million for married filing jointly. The annual gift tax exclusion has also been increased to $18,000 per recipient;9 this allows a taxpayer to give this amount tax-free without using any of the previously mentioned lifetime exemptions. Not only that, but each taxpayer can give up to $18,000 per person to any number of people. By incorporating annual gifts into your overall tax strategy, you can significantly reduce both your taxable income and your taxable estate over time. 

9. Understand Long-Term vs. Short-Term Capital Gains 

Understanding the tax implications of long-term versus short-term capital gains can go a long way in reducing your tax liability. For instance, in 2024 a single taxpayer will pay 0% capital gain tax on their long-term capital gains if their taxable income falls below $47,025.10  That rate jumps to 15% and 20% for taxable incomes that exceed $47,025 and $518,900. Knowing both the nature of your gain, as well as your tax bracket, is crucial information if you want to minimize your tax liability.  

10. Make Sure Your Advisory Team Is Working Together 

Beyond consulting with a tax professional, you’ll want to be sure your entire financial team is working together to provide cohesive oversight and guidance. This should include professionals like CPAs, financial advisors, investment advisors, and estate attorneys. Your finances don’t exist in a bubble and so neither will your tax minimization strategies. When your advisory team works together, strategies are easier to identify and execute. Proactive tax solutions also become much easier to implement, reducing stress and your tax bill. 

Stop Overpaying Today 

Tax planning doesn’t have to be stressful or complicated. At Calamita Wealth Management, we have the tools and expertise to help Wells Fargo employees navigate these strategies and more. If you are tired of overpaying in taxes and looking for creative solutions, we would love to hear from you. If you enjoyed our tax planning strategies for Wells Fargo employees, we can provide more tips. Schedule an introductory phone call using our online calendar. Reach out to us at (704) 276-7325 or to learn more about how we can help. 

About Todd 

Todd Calamita is the founder and managing principal of Calamita Wealth Management. This is an independent, fee-only wealth management company located in Charlotte, NC. Calamita Wealth serves people locally and across the country, that focuses on providing wealth management solutions to affluent individuals over age 50 and their families. He has more than 20 years of experience in the financial services industry. Todd Calamita is passionate about helping people have a better life. He does this by designing and implementing customized financial plans that bring clarity and confidence.

Todd is a CERTIFIED FINANCIAL PLANNER™ and CERTIFIED DIVORCE FINANCIAL ANALYST® professional. His educational background includes a Bachelor of Business Administration from Ohio University. He also received a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University. Aside from planning, he authored, Plan Smart: Conquering 10 Common Money Traps. Todd also wrote numerous articles on wide-ranging personal finance topics, from taxes to retirement accounts. He featured in a Financial Boot Camp TV series as a volunteer. There he was showing people how to make smart decisions with their money. When he’s not working, you can find Todd spending time with his wife, Teresa, and their two sons, Colin and Cameron. He enjoys rock climbing, swimming, and traveling. Todd even has a black belt in Tang Soo Do, a Korean martial art. To learn more about Todd, connect with him on LinkedIn.


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