It is Time to Start Tax Planning Now

Have you heard the old expression it is pointless to close the stable door after the horse has bolted? Even if you don’t have a horse or a barn, this expression is very relevant to your tax planning.

The expression refers to the idea that trying to prevent a problem after an event has occurred is pointless – closing the door won’t bring the horse back.

The same is true for your business tax planning and preparation. Waiting until the first quarter to start thinking about taxes is too late because you may have missed several opportunities to reduce your tax obligations. The horse is gone; there is no need to close the door.

Start Your Tax Planning Today

Now is the perfect time to work with a tax planning professional to analyze your financial situation, identify opportunities to reduce your tax liability, and select appropriate investment strategies.

By the early part of the fourth quarter, you have a fairly good idea of how your year is shaping up.  You should be working with your CPA to evaluate the timing of income and purchases, as well as planning for capital expenditures.

For example, the purchase of new computers or office furniture will have the same impact on your cash flow if it occurs on December 31 or January 1.  However, the timing will have a dramatically different impact on your tax burden.

Invest in Yourself

An important part of your tax planning is how you compensate yourself as an owner.  Of course, you should plan how much to pay yourself, how much to treat as pass-through income, and how much you should set aside for IRAs or other qualified plans.  Keep in mind the tax laws change and the best course of action a year ago may not be the best strategy this year.

For example, the Qualified Business Income Deduction, which became available in 2018, may allow up to a 20% deduction for qualified business income, real estate investment trust (REIT) dividends and qualified publicly traded partnerships. While you can read the tax code, understanding the fine points of how this law applies to you and how to maximize this deduction can be tricky.

Gain or Loss Harvesting

As a savvy investor, you know that some portions of your portfolio will make money while others may lose money in any given year. Harvesting allows you to use some of your portfolio’s losses to offset capital gains. This strategy will take some time to apply correctly because it will involve the coordination of transactions.  You will want to identify potential investments and plan the timing of the transactions.

Who Can You Turn To?

Your tax preparation firm is not necessarily a tax planning firm. A good tax preparation firm will know the ins and outs of the current tax code and apply it to whatever you have done.  (They are very good at closing the barn door).

Your tax planning firm will proactively help you manage your tax liability. They will present creative strategies to reduce your tax burden. The goal is to take action today to prevent surprises during filing season.

Need a trustworthy and knowledgeable tax planning firm to help you navigate tax code and make the best decisions to manage your tax burden? For over 35 years, Slattery & Holman has built a strong reputation for quality service and sound financial advice to help our clients make the best decisions. We would love to do the same for you.