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  • Writer's pictureStephanie Heredia

Why Tax Planning is important BEFORE tax season!

Updated: Nov 5

Tax Planning is often neglected by most accountants. If you fail to plan, you plan to fail. Why tax planning is key!

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Navigating income tax is hard enough, let a Tampa Accountant help you get ahead of it with tax planning!

Our 3-step process:

  1. Tax Projections

  2. Tax Planning

  3. Tax Preparation

Tax Planning is one of the most crucial things you can do as a business owner because it (1) helps you identify areas you may not be maximizing and/or capitalizing on so that (2) you have enough time to adjust which (3) in turn helps you lower your taxes. However, traditional accountants work on a volume preparer model. They're so busy during tax season preparing 800+ tax returns, that they truly don't have the time to sit with you and understand your operations and/or business well enough to plan ahead.

This is the opposite of our firm. We don't yearn to be a volume model firm. We don't want 800 tax returns. There's minimal value you can add to your clients in a volume firm because you're so buried in work that you never have time to pull your head out of the pile. Our firm works with a smaller number of clients who know the value of tax planning over tax preparation. We put the cart before the horse and our clients know their tax liability before we get to tax season.

If that sounds like something you're missing with your current accountant, keep reading to learn about our tax planning process!

#1 - Tax Projections - Bird's Eye View.

Tax projections can tell us a few things in terms of tax exposure. They tell us where you're at year to date and they tell us where you're trending for year end. By taking your YTD paystubs, profit and loss statements, and other household income sources, we are able to rebuild your tax return to see where your tax bill is likely to land.

This starting point tells us (1) the worst-case scenario tax bill if we change nothing and (2) gives us an estimated payment schedule tailored to you. It also is a roadmap to benchmark against our tax planning checklist to see what's being optimized and/or underutilized.

Example: if you are self-employed and on payroll while your spouse is a W2 employee, we would take your YTD P&L, YTD Paystub, and your spouse's YTD Paystub to (1) show you where your tax liability is likely to end up and (2) let you know if you/your spouses W4's need to be adjusted before year-end.

Once we have our starting point with projections, we move on to the more granular process of tax planning.

Ready to schedule a tax projections call? Click Here!

#2 - Tax Planning - Worm's Eye View.

Tax Planning is a more detailed step past tax projections. Tax planning builds strategies into the projections to see how the tax needle moves. i.e. if we put $30k into a SEP IRA, how much will that save us on taxes? or if we convert from an S-Corp to a C-Corp, how will that impact taxes?

Each tax plan is different as it's tailored to your specific household review. We look at each entity, rental property, W2, and other income sources to identify the missed opportunities.

Examples of things we look at while tax planning:

At the end of our tax planning review, we will help you look at the pros and cons of cash flow vs tax savings. i.e. $7k in HSA funding doesn't equate to $7k in tax savings. Your report will have each strategy identified along with the cash outflow compared to tax savings so you have a holistic picture to look at before deciding what to implement.

Ready to schedule a tax planning call? Click Here!

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#3 - Tax Preparation - Wrapping it all up.

After we figure out (1) your starting point & (2) your identified strategies, we move towards tax season with an implementation plan. i.e. if we identified that updating your salary, adding in a 401k, and writing off your vehicle would save you the most in taxes, we make those adjustments as early as possible and we check in around Q3 prior to tax season to review how everything is now trending post changes.

If all looks good in Q3, we're now well-positioned to have a headache-free tax season! Your tax preparation will be turned around quicker as we've now reviewed and adjusted your financials quite a few times and you won't be blindsided with a surprise tax bill as we've been planning for months ahead to prepare.

Our firm believes in transparency above all else. We never want to walk into tax season with any client with uncertainty. For those reasons, not every client may be a good fit for us. If you're looking for just tax preparation and not tax planning, it's unlikely we can provide much value to you outside of what a TurboTax/H&R Block advisor could do. However, if you're looking for more hands-on tax planning with a firm that prioritizes value-add to their clients, then we'd love to talk to you!

If you have any questions on tax projections, tax planning, or tax preparation contact a Tampa Accountant and we can walk you through it!

Ready to schedule a free tax consultation? Click Here!

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Why Work With Taxes Tampa?

For over a decade, Taxes Tampa has sought to be a communication-focused Tampa Accounting firm. We don’t operate on a volume-based business model which allows us to check in with our clients more than the average accountant in Tampa and offer our clients a more hands-on and advisory tax experience. We want to ensure you understand the ABCs of LLCs, Taxes, and everything in between. Contact us today for a free tax consultation with one of our Tax Accountants in Tampa!

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