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Business owners, if I asked you, “When is tax season?” what would be your answer? If you’re thinking April, I can almost guarantee that you are paying too much in taxes, year after year. Effective year-round tax planning can change that for you, making a significant impact on your bottom line.
The Importance of Year-Round Tax Planning
When it comes to taxes, true planning should be a year-round activity, not just a rush in April. By adopting a year-round tax planning strategy, you have the opportunity to make adjustments and savings throughout the entire year.
Identifying the True Tax Season
The real tax season is late August, September, October, and early November. This is when you can make the most substantial changes to reduce your tax burden. If you and your tax professional are only focusing on April, it’s time to shift your mindset to the fall for true year-round tax planning. This blog will guide you on how to make that change effectively.
Steps to Effective Year-Round Tax Planning
The first step in year-round tax planning is to have a proactive conversation with your accountant. This isn’t just a casual chat; your accountant should come prepared with detailed information about how much you’ve paid in taxes so far this year and what the projected total will be by the end of the year. For example, if you’ve paid $50,000 so far and your total estimated tax liability is $100,000, you know that you need to prepare for another $50,000 in payments.
Armed with this information, you can begin to strategize how to lower that $100,000 to $75,000, $60,000, or even down to $50,000. But without this data, there’s no way to make informed decisions. This is the foundation of year-round tax planning—knowing your numbers and planning ahead to reduce your tax bill.
Advanced Tax Reduction Strategies
The next step in your year-round tax planning journey is to explore strategies for reducing your tax bill. What can you do to lower your taxes? Have you considered the Augusta Rule? Is the home office deduction relevant to you? Are there opportunities to put your children on the payroll? These are just a few of the foundational strategies.
If you’ve already utilized these basic tactics, consider more advanced strategies such as investing in real estate, oil and gas, or even renewable energy sources like wind or solar farms. Each of these asset classes comes with its own set of tax benefits that can help lower your overall tax burden. The key is to have these conversations with your tax professional and explore which strategies are the best fit for your situation.
The Role of Specialized Tax Professionals
It’s essential to recognize that many advanced strategies require specialized knowledge that your regular tax person may not possess. In these cases, you should ask your accountant who on their team can help you, or work together to find the right professionals to add to your tax team. This is a critical component of year-round tax planning—ensuring you have the right team in place to execute your strategy.
Ongoing Tax Planning and Follow-Up
Remember, year-round tax planning is not a one-and-done task in September. It’s a continuous process that requires regular check-ins and adjustments. After your initial call in September, plan for follow-up meetings in October and November to ensure everything is on track. This consistent engagement will help you fine-tune your strategies and ensure you pay as little in taxes as legally possible.
Evaluating Your Tax Team
If you’re thinking, “My tax person would never go for this,” it might be time to reevaluate your tax team. Consider the cost of their service against the potential savings in taxes. Is it worth the investment? If your tax professional lacks the expertise or willingness to engage in proactive year-round tax planning, it could be costing you significantly.
Big Life Financial’s Tax Solutions
At Big Life Financial, we offer a family office-style tax team that collaborates to create a comprehensive tax strategy tailored to your needs. Our team includes every type of professional you might need to ensure you maximize your tax savings systematically, not randomly. We offer a complimentary tax review to compare how your current team is doing against how we could help.
Conclusion: Take Control of Your Taxes
I’m Justin Maxwell with Big Life Financial, reminding you that tax season isn’t just in April—it’s a year-round effort. By focusing on year-round tax planning, you can make significant strides in reducing your tax bill and keeping more of your hard-earned money. If you need help navigating the complex tax world, we’re here to guide you every step of the way.