Don’t worry, there’s still time. Regardless of your income bracket or whether you own a business or file as a single taxpayer, a tax planning session can help you make some tax-saving decisions before the year is over. At the same time, it can get you started early on tax planning strategies that will set you up for success for the upcoming year. A lot has changed in the last year and a half, but taxes are still a reality that businesses and workers contend with.
A tax planning meeting between mid-October and Late December can put you in a good position. Why?
We explain it below.
Tax Planning Meeting to Finish Off the Year Strong
Timing is important when it comes to taxes. Whether you are an individual filer or a small business owner, this rule applies. The ideal time for a tax planning session is towards the end of the year, while some last-minute decisions can offset some imbalances. For example, let’s say you own a restaurant. Your CPA projects that you will have a high income and expenditures are on the low end. This means that you still have some time to purchase the necessary equipment before the end of the year.
Forbes magazine writes that early thinking and planning for the upcoming tax season can make a significant difference to your bottom line. As a business owner, it’s not unlikely that your day-to-day tasks and responsibilities are so all-encompassing and consuming that planning ahead seems like an impossibility. This small decision, however, can put your business in a good place.
What Does Tax Planning Involve?
Tax planning takes into consideration several aspects of your tax expenditures. It goes beyond calculating how much you should set aside for taxes at the end of the year. Strategic tax planning will incorporate all facets of your financial situation and ensure a cohesive action plan to minimize tax burdens and better prepare for changes or regulations.
What Are Some Possible Tax Strategies Discussed?
Depending on your tax situation, your CPA will have different recommendations or tips about tax strategy. Your CPA may advise or discuss some of the following:
- Accurately identifying deductions
- Purchasing essential equipment at the right time
- Delaying or timing customer payments so they land on the next tax year
- Expediting similar customer payments it is better to receive them this tax year
- Charity contributions
- Sending contributions to retirement plans
Other End-of-the-year Tax Planning Strategies
The end of the year is a smart time to review all aspects of your existing strategy or lack thereof. Many people fail to take advantage of every tax benefit simply because they don’t plan ahead or learn about changes as they happen.
Other potential strategies include:
- Offsetting investment gains with losses. As CNBC reported, you can offset capital gains with losses.
- Converting to a Roth IRA. Roth conversions are popular right now because of the year of uncertainty that was 2020 and 2021. This means that individuals that have pre-taxed individual tax accounts to an after-tax Roth IRA.
The Power of Charitable Donations
The tax system incentivizes donations to qualifying charities or organizations. Americans are generous people. Even in an uncertain financial year, charitable donations raked up to $471.44 billion in 2020. There are more than 1.54 million charitable organizations in the nation, and their causes range from everything from education, cancer research, or helping the homeless.
The end of the year is a good time for making these donations. Cash donations to public charities can be fully deductible, up to 100% of adjusted gross income.
A Tax Planning Session Can Make a Difference
Regardless of your tax filing status, planning ahead is essential when it comes to your taxes. A tax planning session is with your tax professional or CPA, as they can better help you assess your financial situation and apply for potential deductions or benefits. The session can also:
- Put you in control and ahead of the game. Taxpayers that plan ahead for the tax season can make financial decisions with more confidence.
- Allow you to take advantage of planning opportunities. Some people think that tax planning sessions are just for high-income earners. Not so. Tax benefits can apply to IRA contributions, student loan interest, and more.
- Help you deal with major financial events. Whether you are buying a home, selling a home, or retiring, tax planning puts you in a good position to do so.
The Ultimate Goal is the Reduction of Tax Liability
Whether you are a business or sole filer, the reduction of tax liability is a top priority for many people. This also means avoiding tax audits by ensuring proper filing and working with a qualified professional. For business owners, the allocation of profits directly into new equipment, hiring, better infrastructure—or whatever it may be that your business needs— is more desirable than sending it off to the IRS.
Schedule Your Tax Planning Session Today with the Expert at R&R!
Do you want to get ahead of the game? Or want to kickstart your tax year on the right foot? Get tax help from the pros. A little tax planning session can help with that. Talk to one of our experts today and learn about tax benefits for you or your business.
Want to learn more? Call R&R Tax Services to schedule our consultation.