Save money. Live better. Tax planning! Oh, you thought we were going to say Wal-Mart?! Well, if you follow the guidelines here you’ll save more than your average trip to the store for groceries or personal items. As the best Charlotte CPA firm, this is exactly what we can do for businesses and individuals with our tax planning services.
What Is Tax Planning?
Tax planning is the exercise of forecasting your tax liability through the best use of all available allowances, deductions, credits, exclusions, and exemptions, to reduce income and/or capital gains thereby reducing your overall tax bill. Tax planning can be done for the current year or for future years and as laws change it becomes vitally important to take advantage of the various changes. This could mean taking action prior to a certain law expiring, or possibly delaying something until you can benefit from a new law taking effect.
Tax planning helps taxpayers:
1) Lower the amount of their taxable income;
2) Reduce their tax rate;
3) Allows greater control of when taxes get paid; and
4) Maximizes tax relief and tax credits available.
Considering that taxes are often the greatest expense individuals and businesses face in their lifetimes, it doesn’t hurt to stay up to date and limit this expense as much as possible. Tax planning involves the analysis of your financial situation from a tax perspective with the end goal of gaining tax efficiency to achieve one or more of the factors noted above.
Can I Take Advantage of Tax Planning as an Individual Taxpayer?
Yes! All taxpayers can benefit from tax planning. According to a research study, 95% of all taxpayers are paying more tax than they are legally required to. Your accountant, who should also double as a tax consultant, should always be up to date on all the latest tax law changes to help you take full advantage of any and all allowances, deductions, credits, exclusions, and exemptions which are relative to you and your financial situation. As time progresses, the tax rules and regulations will change, thus, the importance of tax planning with a properly informed CPA.
How Will Tax Planning Help My Business?
Tax planning can be an untapped source of working capital for many business owners. Effective planning will limit your tax liability and as a result, you will keep more money flowing into your business. That money can be used for expenses, payroll, investments, and growth opportunities. If you have a more complicated small business, we highly recommend that you start planning early. This thoughtful process will not only help you on a year-to-year basis but will also help minimize taxes paid upon the sale or exit of your business. This process of working through financial decisions is why we are the top Charlotte small business accountant.
What to Pay Attention to Throughout the Year
1) Ways to Lower Your Adjusted Gross Income
One of the best ways to lower your AGI is to contribute money to a retirement plan. This contribution will reduce your wages and thus lower your tax bill. We can review your financial statements to make suggestions regarding retirement contributions.
2. Ways to Increase Your Tax Deductions
Compare the standard deduction to your ability to use itemized deductions. Itemized deductions include expenses for health care, personal property taxes, mortgage interest, and gifts to charity (among many others). Therefore, you should keep track of these expenses throughout the year so that your accounting firm can quickly compare your itemized expenses with your standard deduction.
3. Increase Your Withholding
To avoid owing at the end of the year you can increase your withholding with each paycheck or make sure you are making appropriate estimated tax payments. With increased withholding, more money will be taken out throughout the year to reduce the likelihood of underpayment penalties or owing at the end of the year. It is not recommended to overpay for a big tax refund though which further stresses the need for accurate tax planning.
Tax planning isn’t sexy, we know. But it’s always advantageous to plan-ahead for many things in life and taxes are no exception. Being stuck with a huge tax payment each year, or worse, overpaying on your taxes altogether can be overwhelming and is unnecessary if you take the proper steps to plan. It takes a little time each year to feel prepared and ready for anything that might come at tax season. Our services will put you in the best position possible each and every year. Contact Eliseo CPA, PLLC, the best CPA in Charlotte, NC, to get the process started for the upcoming year!