What is tax planning?
Tax planning is the analysis and strategy of a person’s or businesses financial situation to maximize tax breaks and minimize liabilities in a legal and efficient manner.
Why should you do yearly planning?
If you dread to see the “taxes due” amount on your tax return, then tax planning should be something to investigate. Simply, it can save you money. By working with an accountant, you can create a tax strategy that ensures that you are minimizing your tax obligations in every way. Avoid costly mistakes like missed tax payments and late filings.
The more efficient your business is the more profitable it becomes. Keep every hard-earned penny!
How does tax planning work?
By working with an accountant, they will walk you through a process, which typically consists of the following:
1. Planning – Review of your current situation. Find the gaps and inefficiencies where tax and money can be saved.
2. Implement the best planning option for you and your business
3. Preparation of your tax Returns.
Some things to consider are timing of planning, amount of income, business size, as well as expected purchases or expenses before year-end.
Tax strategies vary but some can include reviewing your entity type and tax filing status.
When should it be done?
Tax planning really should be done well before your tax returns are prepared and filed. We tax plan at the midway point of the year (June/July) and review it again at year-end (October-December). This is because it gives you time to set up, implement and review your tax strategy.
If you think you can tax plan right before or during your return being prepared, you have got it wrong. Timing is a huge factor in tax planning. Planning for your business should be a year-round activity, with your tax returns being the result of a year’s worth of hard work and planning. Be proactive and avoid planning at the last minute before it is too late to make any adjustments to save money.
We always suggest planning and to act early to save later.
Here is an example we had with two clients that cut their tax bill down by over 90%
Disclaimer: This is a real example with real clients, but everyone’s tax situation is different, so you can not expect to see the same exact results, but you can still expect a much more efficient tax year when you do planning!
Do you think you would benefit from tax planning: set up an appointment with us today