Most business owners are familiar with financial planning. It makes sense to formulate a vision for your personal or company goals and how to achieve them. Financial planning deals with how resources are acquired and leveraged to reach those goals. Strategic tax planning, though different, is just as important. Strategic tax planning should go hand-in-hand with financial planning.
Why You Need Strategic Tax Planning
You want to have an efficient approach to dealing with taxes by exploring actions that will decrease your taxes while avoiding activities that would unnecessarily increase them. The ultimate goal is to preserve your wealth so you may have more money to invest, save or spend. Planning tax strategies will help you make better financial choices. You get the most out of tax benefits, you can take advantage of IRS changes in tax law, and you can avoid dreading or even missing deadlines.
What is Strategic Tax Planning?
On the most basic level, tax planning is about setting up specific strategies in leveraging current tax law benefits to avoid or delay paying taxes. A good tax plan will inform choices made in your financial planning with the ultimate goal of saving on fees and lowering taxes. This tax planning will involve how you spend money for yourself, your home, and your business in several ways:
- Timing – You will need to think about the most advantageous timing for generating income and making specific purchases. Under some circumstances, it will be to your advantage to reduce your income. Timing your purchases and how you make them can dramatically affect tax outcomes, as well. A tax advisor can help you make a tax plan that works with these decisions.
- Investments – Create a strategic plan to apply specific tax rules related to many different types of investments, whether stocks, commodities, or real estate.
- Retirement – There are many options when approaching a retirement plan. IRAs, annuities, and other investment strategies require careful planning and consideration. Tax implications regarding when to invest, when and how to withdraw funds, and amounts for either can be tricky. Without a strategic tax plan, these retirement mistakes can be costly.
When Should You Implement a Strategic Tax Plan?
You should create a new strategic tax plan every year. By the end of a tax year, immediately after your tax return is filed, your business should schedule a tax planning meeting with your accountant for the upcoming year. It’s a great time to look at the data from the preceding year to accurately evaluate outcomes that will affect a plan for the following year. Executing a plan as early as possible will prove much more beneficial at the end of the tax year.
Myrick CPA believes that strategic tax planning can be advantageous for anyone, and we want to see all our clients benefit from the best possible tax outcomes. Contact us to help you develop your next year’s strategic tax plan.