SIPS Advanced offers five Tax Calculation Options for Accounts:
Correctly setting the Tax Calculation Option for accounts is an important step to ensure your plan is calculating taxes accurately. This article will use a hypothetical structured income plan to demonstrate how to change and correctly set the Tax Calculation Option for common account registration types. We'll begin on the Structured Income Planning page and guide you through the process.
To learn about Tax Calculation Options see articles:
- Tax Calculation Options for Accounts
- Tax Calculation Options for Incomes for a W-2 Employee/Traditional Worker
- Tax Calculation Options for Income for a 1099 Worker/Multi-Stream Earner
Step 1: Approx Income Tax: Note the amount and percentage in this column.
Step 2: Edit: Click on the green Edit button under the Structured Income Planning heading.
Step 3: Manage: Click on the green Manage button within the IRA Income column.
Step 4: Tax Calculation Option: Since this is an IRA, all distributions are taxed as income. The tax calculation option should be set as Tax Income Distributions (Qualified).
Step 5: Save: Click on the green Save button under the Manage Account heading.
Step 6: Approx Income Tax: You will automatically be taken back to the Structured Income Planning Page. Note the amount and percentage changes (if applicable) in this column.
Step 7: Manage: Click on the green Manage button within the ROTH 401(k) Income column.
Step 8: Tax Calculation Option Dropdown Arrow: Select the dropdown arrow located in the Tax Calculation textbox and select Do Not Tax (ROTH) since this is a ROTH account and both additions and withdrawals are not taxable.
Step 9: Save: Click on the green Save button under the Manage Account heading.
Step 10: Approx Income Tax: You will automatically be taken back to the Structured Income Planning Page. Note the amount and percentage changes (if applicable) in this column.
Step 11: Manage: Click on the green Manage button within the HYSA (High Yield Savings Account) Income column.
Step 12: Tax Calculation Option Dropdown Arrow: Select the dropdown arrow located in the Tax Calculation textbox and select Tax Growth Only (NQ Interest) since this is a High Yield Savings Account. The growth in this account each year will be taxed as taxable interest. 
Step 13: Save: Click on the green Save button under the Manage Account heading.
Step 14: Approx Income Tax: You will automatically be taken back to the Structured Income Planning Page. Note the amount and percentage changes (if applicable) in this column.
Step 15: Manage: Click on the green Manage button within the Annuity Income column.
Step 16: Tax Calculation Option Dropdown Arrow: Select the dropdown arrow located in the Tax Calculation textbox and select NQ Annuity Distribution since this is an Annuity account.
Step 17: Save: Click on the green Save button under the Manage Account heading.
Step 18: Approx Income Tax: You will automatically be taken back to the Structured Income Planning Page. Note the amount and percentage changes (if applicable) in this column.
Step 19: Manage: Click on the green Manage button within the BA (Brokerage Account) Income column.
Step 20: Tax Calculation Option Dropdown Arrow: Select the dropdown arrow located in the Tax Calculation textbox and select NQ Investments-Dividends and Capital Gains since this is a Brokerage Account.
Step 21: NQ Investments-Dividends and Capital Gains: Three new textboxes should have automatically appeared on the screen: Starting Capital Gains, Average Annual Dividends, and Trading Style or Turnover.
Step 22: Starting Capital Gains: SIPS allows you to model any starting unrealized capital gains in an account. For this hypothetical example the starting capital gains will be $100,000.
Step 23: Average Annual Dividends: For this hypothetical example the average annual dividends will be set at 2%. The total hypothetical return is 5%. SIPS automatically calculates tax liabilities for both withdrawals and the annual growth of your account. SIPS will assume 2% of the 5% annual growth is taxed as a dividend each year. The remaining 3% will be allocated as capital gains, which are the profits subject to tax when assets are sold.
Step 24: Trading Style or Turnover: The remaining 3% of account growth each year will be attributed to capital gains. (5% total hypothetical return - 2% return attributed to dividends = 3% remaining account growth attributed to capital gains). You can model how frequently the account is traded by using the Trading Style or Turnover textbox. This allows you to adjust how much of the 3% remaining account growth attributed to capital gains should be treated as short-term or long-term capital gains each year.
Enter a number between 0 and 100 to indicate how frequently the account's assets are traded. A value of 0 means no trading, while 100 indicates a complete annual turnover (all assets sold and re-bought within a year). For this hypothetical example we will use 30%, since this is a managed account that undergoes periodic buying and selling to maintain its investment strategy or rebalance for dividends. 
Step 25: Save: Click on the green Save button under the Manage Account heading.
Step 26: Approx Income Tax: You will automatically be taken back to the Structured Income Planning Page. Note the amount and percentage changes (if applicable) in this column.
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