How the Wealthy Are Navigating an IRS Slowdown and Fed Rate Cut — and What You Can Do Too

The IRS furlough amounts to an ‘operational freeze’ and the Federal Reserve just lowered rates for a second time.  These and other forces create a rare and volatile combination for investors, business owners, and high earners. The government’s tax enforcement arm is partially idle, while the central bank has just made borrowing cheaper and liquidity more abundant.

For most taxpayers, the result is uncertainty. For savvy taxpayers, it’s an opening – one that rewards planning, structure, and timing.

Wealth erosion rarely comes from bad investments – it comes from unplanned taxation. The same discipline that protects billions can protect millions.

The truth is, the 1% aren’t waiting to see what happens next. They’re already moving assets, adjusting entity structures, and using the 1500 tax strategies buried in the 75,000 pages of tax code to protect and compound their wealth. The little-known secret is: the same strategic moves they’re making are available to anyone who understands the playbook.

Here are five powerful strategies to deploy right now:

1. Lock in Low-Interest Leverage Before Inflation Rebounds

The Fed’s latest rate cut means the cost of capital has dipped again. For entrepreneurs and investors, that means it’s time to secure low-cost leverage while it lasts.

Business owners benefit from strategic borrowing – versus consumption debt – to reposition assets and accelerate wealth. This includes refinancing existing business or real estate loans, leveraging securities-based lending (SBL) or margin loans backed by investment portfolios.

Here’s how to act now:

• Refinance real estate debt at newly reduced rates, even on commercial or investment properties. Short-term rate reductions can translate into long-term savings if locked through refinancing or interest-rate swaps.
• Utilize an SBL facility to access liquidity without triggering capital gains from asset sales. These loans typically carry rates well below traditional credit lines and allow continued market participation.
• Deploy leverage toward appreciating or income-producing assets instead of liabilities. The goal is to let borrowed dollars compound wealth at a higher rate than their cost.
• In an environment where rates could rise again once inflationary pressures resume, securing low-cost leverage now can create a generational advantage.

2. Accelerate Income Recognition While Tax Rates Remain Favorable

The IRS may be on pause, but the tax code isn’t – and today’s tax brackets are historically low. The top federal income tax rate of 37% and corporate rate of 21% are set to sunset in 2026, potentially reverting to pre-2018 levels of 39.6% and 28%, respectively.

Accelerating taxable income now can actually reduce lifetime taxes. While it sounds counterintuitive, this is a hallmark move of advanced tax strategy planning.

Actions to take:

• Pull forward income by exercising stock options, realizing capital gains, or converting traditional IRAs to Roth IRAs before rates rise.
• Restructure business compensation to front-load earnings in 2025 under current lower brackets, while deferring deductions into higher-rate years.
• Harvest capital gains strategically: If investments appreciated, realizing them in a low-tax environment locks in gains at 15% to 20% rather than a possible 25%+ later.
• In other words, the IRS’s slowdown doesn’t freeze the code – it freezes enforcement. Planning moves like these don’t require the IRS to function; they just require foresight.

3. Rebalance Business Entities for Flexibility and Asset Protection

Entrepreneurs with multiple entities – especially those with partnerships, S Corps, or holding companies – benefit from using this downtime to conduct a Forensic Entity Review. The IRS furlough means delayed oversight, making now the perfect time to restructure efficiently.

Seasoned entrepreneurs often use multi-entity structures to isolate risk, optimize taxation, and plan succession. You can too, but it takes deliberate coordination.

Practical steps:

• Audit intercompany agreements to ensure management fees, rent, or royalty arrangements are properly documented and priced. These internal transfers can help shift taxable income strategically while maintaining compliance.
• Convert C Corporations or partnerships where advantageous. For example, converting an LLC taxed as a partnership to an S Corp can reduce self-employment taxes if profits exceed reasonable compensation thresholds.
• Create or fund family limited partnerships (FLPs) or holding companies to consolidate investments and facilitate generational wealth transfers under valuation discounts.

An IRS backlog means fewer eyes on newly implemented structures – but that’s not an excuse for sloppy documentation. This is the time to build precision and defensibility into your framework.

4. Reallocate Portfolio Risk to Capitalize on Lower Yields

The Fed’s rate cut will ripple through every asset class. Bonds will rally, yields will compress, and income-seeking investors will face diminishing returns. The wealthy are already repositioning portfolios to capture growth and hedge inflation.

Key reallocations to consider:

• Shift from fixed income to real assets like commercial real estate, private credit, or infrastructure. These provide yield and inflation protection.
• Increase exposure to tax-efficient growth vehicles such as municipal bonds, Qualified Opportunity Zones (QOZs), or insurance-linked investment strategies.
• Harvest losses strategically from underperforming holdings to offset future gains – particularly while the IRS is slow to process amended returns.

These shifts aren’t speculative; they’re structural. Taxpayers with traditionally high liabilities understand that monetary easing erodes the purchasing power of idle cash. Every dollar should either grow, shield, or flow through a tax-efficient vehicle.

5. Build a Tax Strategy That Outpaces Policy Whiplash

Perhaps the most important lesson from this moment is that reactive tax planning doesn’t work. IRS shutdowns, rate changes, and election-year politics all create uncertainty. But strategy – not compliance – determines outcomes.

Our clients use ongoing, proactive planning to stay ahead of the code. That means integrating tax, legal, and financial strategy year-round, not just at filing season.

Actions to take now:

• Engage in quarterly tax strategy sessions with a tax strategist (not just a CPA). Review entity elections, cash flow projections, and potential law changes before they happen.
• Implement a permanent tax blueprint – a forward-looking plan mapping out deductions, credits, entity use, and estate tactics across multiple years.
• Ensure every investment has a tax purpose. Ask: How does this asset improve after-tax return? If it doesn’t, reallocate it.  Importantly, ensure these are substantiated when filing to make your deductions impenetrable.

The Bottom Line  

The convergence of an IRS furlough and a Federal Reserve rate cut won’t last forever. Eventually, rates will rise again, and the IRS will resume enforcement with a backlog of cases and scrutiny. The winners in this environment are not those who wait, but those who act deliberately now – leveraging low rates, optimizing entity structures, and locking in tax efficiency before the window closes.

If you haven’t reviewed your tax and wealth plan since the last policy shift, you’re already behind. A comprehensive tax strategy review including tax structure, income timing, and investment alignment can turn uncertainty into advantage.  Only 4% of CPAs are trained to do this work – you want a verified tax strategist.

Written by Michael Moffa. Have you read?
The World’s Best Medical Schools
The World’s Best Universities.
The World’s Best International High Schools.
The World’s Best Business Schools.