Summer is within reach; school is almost out and many people are thinking about vacations and warmer weather. With a third of the year behind us, first quarter earnings in the bank and taxes filed (or extended), tax planning is the last thing on many peoples’ minds.
The common misconception is that tax planning occurs in November or December, or at least later in the year. If that is your plan, you are potentially missing opportunities to make sure you are as tax efficient as possible.
When should tax planning begin?
In order to achieve maximum benefits, tax planning should begin proactively early in the year and be a continuous process. Ideally, you should have already had a meeting with your tax advisor to discuss how your 2017 budget/projection and net income will compare to prior years. We suggest you meet at least 2-3 times with your tax advisor throughout the year to develop a plan and adjust as additional financial information is available.
The new administration will likely bring tax law changes and while we don’t know exactly what these changes will be or even whether they will be implemented for 2017, you need to be prepared.
For business owners, it is important that you have a budget/projection and up-to-date financial information so accurate information can be used for planning. If you are behind, you need to develop a plan to get caught up immediately. You will also want to revisit your budget to determine if any adjustments need to be made. This will assist with determining what net income will look like for the remainder of the year. Don’t forget to consider major fluctuations in revenue and major expenses that you may incur, such as fixed asset purchases, or other items that would have a substantial impact on net income for the year.
Your CPA is should also serve as a valuable part of your business advisory team. Consult them prior to making major business decisions to discuss considerations of all tax implications and ensure tax treatment of business decisions are properly set up from the beginning.
For individuals, you should consider how the current year differs from the prior year. Is income higher or lower? What about changes to deductions? Did you make estimated tax payments? Should you consider adjusting withholdings for the remainder of the year? Did you have any other changes that will impact current year taxes?
Are you as tax efficient as possible? If you can’t answer this question with a definite “Yes”, it is time to set a meeting. Remember, that tax planning should happen proactively as opposed to reactively. I would be happy to discuss any issues you may be facing or to review your current tax situation. You can reach me at 970.352.1700 or email@example.com.