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Tax Planning AFTER April 15th

It is a common belief that once April 15th is past, you can breathe a sigh of relief, and not think about taxes again until next year.  But that is not true, since there can be a great deal of value in tax planning throughout the year.  Tax problems may have been avoided if you had consulted a professional as events were unfolding, rather than waiting until the next tax season when you are filing your tax return.  Here are a few suggestions to help you become more organized and to make sure you are taking advantage of the tax code.

Meet with Your Tax Professional

Most people only meet with their tax professional during tax season.  Unfortunately, that is probably the worst time for such meetings.  During tax season, your CPA is focused on getting tax returns completed and filed, and they likely have all of their resources (and most of their time) dedicated to that process.  Most tax planning at that time tends to be last minute, e.g.,  funding IRAs for the prior year.  Those things can certainly reduce your tax liability, but cannot typically make a big difference, since you can’t go back and change things you did (or didn’t do) during the prior tax year.  Tax planning throughout the year, not just during tax season, can better optimize financial decisions that will impact that year’s tax liability.

Strategic Decisions

There are often several times during the year when financial events with tax implications take place.  If you are making changes to your business, buying or selling a home or large amounts of stock, and/or otherwise are transferring assets, a meeting with your CPA can help determine how to best structure those events in the most tax efficient way. 

During such meetings, your accountant can typically also give you an estimate of the tax bill you will be facing at the end of the year.  No one likes big tax surprises, so even if there is no way to reduce your tax liability, such meetings can at least make you aware of the check you will need to write in April so you are prepared.

Utilize Expertise

In addition to their training and education, most CPA’s have seen hundreds of different tax situations.  This allows them to share with you examples of things that have worked (or not) for other clients in minimizing their tax liability.  Working with someone with years of experience can be very valuable in helping you make decisions with long-term implications.  A seasoned accountant will walk you through your decision, and make you aware of potential pitfalls they’ve seen with other clients, thereby making your road smoother, while still taking advantage of opportunities. 

You, of course, must ultimately decide whether you want to plan ahead and better organize your financial life.  Taking control and proactively planning ahead, and actively engaging your tax professional (not just at tax time), will help you make better decisions and take advantage of financial and tax opportunities on the road ahead.

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