One of the most advantageous things about working with an accountant is the ability to plan for the future. When it comes to our tax planning services, our goal is to maximize your tax deductions so you can save as much money as possible. We make sure you only pay the tax necessary.
In order to keep more money in your pocket, you need to be more aware of your tax situation. Here’s how tax planning services can help you save money.
Tax Planning vs. Compliance
Tax compliance simply means filing your taxes in accordance with the law. So, for personal taxes, this would mean making sure you comply with the requirement to file your taxes by April 15th or file a request for an extension. Tax compliance doesn’t take into account all the options available to you. It’s not up to the IRS to make sure you’ve claimed all the possible credits and deductions that are available to you and your business. That’s up to you and your accountant.
This is where tax planning comes in. It’s a detailed analysis of your tax situation and the deductions and credits available to you and your business based on your situation. Every time something major happens in your life, your tax situation changes. This is the same if you run a business.
A major problem with using software to do your own taxes is that even though most of them have what they call an “interview” function where they ask a lot of questions about your tax situation if you don’t know all the tax laws, you don’t have the ability to try out different scenarios to see which one is the best for you.
For example, there is more than one way to calculate business vehicle expenses. You can use the actual vehicle expenses incurred, pro-rated for business use, or you can use the IRS mileage rate. A bit of tax planning and thinking ahead can help you decide which method is the best, but if you use both methods, or calculate your vehicle expenses incorrectly, this might trigger a tax audit.
Tax Planning Services
Tax planning services help you be more aware of your tax situation. The ultimate goal of tax planning is managing your tax situation in order to minimize the tax you pay. This can be done in a variety of ways depending on the accountant you hire, but it’s difficult to do it on your own unless you know the tax laws and calculations required to estimate your taxes.
One method of managing tax through tax planning services is by running various scenarios. This can be done for both personal and corporate tax situations. Based on your previous year’s tax situation and any changes during the current year, your accountant will calculate your tax liability depending on the various options available to you.
For example, if you’re unsure whether you should be paying yourself a wage from your company, your accountant can calculate comparison scenarios for you to determine how this decision will impact both your business and your personal tax returns.
How does tax planning save money?
If you only see your accountant once a year during tax season, you are missing out on potential money-saving opportunities. Many government incentives also come with deadlines in addition to the criteria that must be met in order to take advantage of them. If you miss the deadline, you miss out on tax savings which could mean less money in your pocket.
For example, the Tax Cuts and Jobs Act introduced the ability to defer capital gains if funds are invested in a Qualified Opportunity Fund (QOF). Gains can only be deferred if taxpayer funds are invested in a QOF within 180 days from the date the investment is sold. This could mean paying tax now as a result of the sale versus paying the tax down the road when it may be more feasible for the taxpayer to do so.
Who should take advantage of tax planning?
Everyone can benefit from tax planning services, but the more complicated your tax situation is, the more opportunity it is for you to benefit from tax planning. If you are a business owner, there may be more opportunities for tax planning than if you are an employee, but as an employee, you can still benefit from tax planning.
HIgh net worth individuals can benefit from tax planning by timing the sale of their investments to minimize tax liabilities from capital gains. Charitable donations and gifts to family members also provide tax planning opportunities when it comes to the timing of these transactions.
Individuals nearing the end of life can also benefit from tax planning. There are a number of ways to minimize estate tax, so you can pass on more money to your family in the event of your death.
If you own a business, there are different tax planning opportunities available to you depending on how your business is structured. A sole proprietor is somewhat limited in what they can do compared to a corporation, but that doesn’t mean they shouldn’t discuss tax planning opportunities with their accountant.
Our Tax Planning Services
At Brook Bay Consulting, PC, we believe tax compliance is best combined with tax planning. We keep up to date on tax laws so we’ll always know when something might affect our client’s tax situation. We don’t just file your tax return, we maximize your filing position so you can save the most money.
We offer tax planning services at both the corporate and personal level because when you own a business, personal and corporate taxes are both affected. If you’d like to find out what tax planning opportunities are available to you, complete this form to schedule a complimentary call today.