Tax Planning

Helping you optimize your tax situation

“The difference between death and taxes is death doesn’t get worse every time Congress meets.”
— Will Rogers

The Internal Revenue Code and its related regulations, interpretations, and procedures are ever-changing. It starts to become a numbers game in a sense, that oftentimes only the wealthiest individuals and largest corporations seem to win. But why is that? My experience over the years has been that the wealthiest individuals and largest corporations spare no expense in getting the tax and financial advice that benefits them most, so that they pay no more than their legal share of taxes.

But what about the rest of us? When the wealthiest individuals and corporations are eliminated from the tax landscape, the rest of us are left holding the bag. The federal government has expenses that must be paid. The question that follows is whether we will do what is in our power as individual taxpayers to improve our own tax positions so that we can enjoy some of the fruits of our own labor and so that we can provide for our retirement and our families—hopefully without losing unnecessary dollars to taxes today.

What is Tax Planning?

Tax planning is analyzing a taxpayer’s financial situation to determine what strategies are available that would assist the taxpayer in becoming tax-efficient, which means legally paying the minimum amount of tax possible for the taxpayer’s situation.

While many accountants and CPAs offer services that fall under the tax planning umbrella, most of the time these services involve planning for the next tax year only and not necessarily for the future, such as determining how much should be paid during the year in estimated taxes.

And while many taxpayers use a financial planner, most financial planners know very little about taxes and do not incorporate tax knowledge into products and strategies that they implement for their clients. Sure, financial planners generally know the difference between a Roth IRA and a Traditional IRA, but in many cases, they do not have enough in-depth tax knowledge to know which one is best for a taxpayer given his or her entire tax picture today and what it is likely to be in the future. Oftentimes the financial planner will ask when you prefer to pay the taxes—now or later—and recommend an investment vehicle based on your answer.

Additionally, most tax preparers do not have enough information about a taxpayer’s business and personal tax situation to recommend strategies tailored to his or her situation. I have worked for several accounting firms over the years, and for clients that talk to their CPA once per year at tax time, there are generally few options left once the year has already closed to save clients money in taxes. The preparer is simply helping the taxpayer in getting the return filed properly, recommending the few tools that are left after the calendar year ends which may be beneficial, and putting together estimated tax payments for the next tax year. But is that enough? For small business owners, most likely it is not enough, and you could probably use a comprehensive tax plan.

What Is a Comprehensive Tax Plan?

A comprehensive tax plan involves hiring a tax professional to look at your family situation, your businesses, your assets, your debts, and your investments and determining what options and strategies are available to you that would enable you to minimize your tax obligations.

Though it is easier to develop a comprehensive tax plan for clients whom I have prepared taxes in the past, I am also able to assist clients with tax plans who have used other CPAs to prepare their taxes, provided that the returns appear to be in good order and the taxpayer has a good handle on his or her financial situation.
The best time to start a comprehensive tax plan is as early as possible after the tax return is filed for the most recent tax year. That way we are dealing with final numbers that are unlikely to change, but there is also enough time remaining in the year that we can optimize the current year’s tax savings.

What is the Process of Developing a Comprehensive Tax Plan?

The process of developing a comprehensive tax plan involves the following steps:

  1. Obtaining information from the client via a question and answer process, which the client can either answer independently or through a phone or Zoom call.
  2. Reviewing the client’s three most recent individual and business tax returns.
  3. Discussing projected changes in income and/or circumstances that the client foresees in the near-term future, discussing goals the client has for the long-term future and getting into some of the nuts and bolts of how the client’s business(es) operate (number of employees, significant expenses, income sources, profitability, etc.).
  4. Analyzing the information and compiling relevant strategies for the client, that if implemented, can reduce the client’s tax liability.
  5. Providing the client with a detailed deliverable that illustrates the amount of tax savings that can be accomplished by implementing the various strategies, which includes a description and explanation of each strategy.
  6. (Optional) If desired, the client and I can have an hour-long phone or Zoom call discussing the various options after the deliverable is provided, or if the client wants to minimize costs by receiving the deliverable only as presented in step 5, is an option as well.

What Happens After the Plan is Developed?

For clients that I work with all year after the plan is developed, we continue our monthly, quarterly, or annual work with an eye on the tax strategies that the client has decided to implement. Some clients will likely only want the information, while others will want additional help with how to implement the strategies.

Implementation engagements occur separately from the tax plan itself.

How Much Does a Comprehensive Tax Plan Cost?

My comprehensive tax plans start at $2,000. While many taxpayers may think that is expensive, the tax savings that we are able to find will generally outweigh this cost significantly. The $2,000 includes a client’s individual tax situation who has only a single business or rental property. However, additional options that might increase the cost of the plan are as follows:

  • Additional businesses or real estate investments
  • The desire for a consultation at the end of the plan
  • Whether assistance is requested with getting books to a condition where a tax plan will be fruitful
  • Whether the client has tax issues that need addressing first

The majority of Americans pay more than $2,000 in taxes and most probably don’t even notice it. If you own a small business and your taxable income is $80,000 or more, you will likely receive tax savings strategies worth significantly more than your cost of developing a comprehensive tax plan. When you take those tax savings over multiple years, and especially if you invest the difference, it could be looked at as more of an investment.

Why Do I Offer Comprehensive Tax Plans?

My firms have been established for over four years and I have assisted many small business clients with their taxes, accounting, tax consulting, business contracts, IRS debt resolution, and much more. However, when the Tax Cuts and Jobs Act was enacted in 2018, I noticed how the major changes that resulted from the legislation impacted many of my small business clients. Now that we have a new president in 2021 with new tax legislation proposed, I would like to proactively offer taxpayers a way to make the best decisions they can, so that they can be as tax efficient as possible. I feel that one of the best ways I can help small business owners be successful is to help them become tax-efficient so that they can have more money to invest in their families, their businesses, and their retirements.

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