This is a great question that we receive from time to time. The answer is yes, and here’s why.
Tax planning identifies future opportunities for you.
Just because your accountant doesn’t come up with any immediate recommendations doesn’t necessarily mean that it wasn’t worthwhile going through the process. You might be taking advantage of all available deductions for your current situation, but going over everything you are doing in detail, and having discussions with you about it, often uncovers things we can take advantage of in the future.
For example, you own your own business but not the building it’s in. In the next 12 months, you may want to purchase the building because your business is continuing to grow.
First, you’ll need accurate financial statements and other supporting documents when seeking a loan for the purchase to help paint your financial picture for the bank.
Once you’ve acquired the building, you might add improvements that you can depreciate (depending on their life span.)
Down the road, if you want to sell the business and retain the property, you’ll earn passive income from the rent collected.
Each of these scenarios are important financial events that can impact your financial and tax situation, and the conversations with you in your tax planning meeting bring these to the forefront. Your CPA can now recommend specific actions to assist you and put you in the best possible position come tax time.
Tax planning helps you better understand your numbers.
Tax time can be stressful because there are a lot of unknowns. When you’re not sure if or how much you will owe, it makes it difficult to plan for other financial decisions in your business and personal life. When you skip tax planning, that unknown becomes that much larger.
While you have a good understanding of your business’ numbers, there are differences between what your books show and what is taxable income. The numbers from your books may differ based on how you make certain adjustments. For example, for tax purposes you can only deduct 50% of your meals, but on your books you have deducted 100% of your meals. Your accountant understands what income adjustments to make and the latest tax law changes impacting your business that can significantly increase or decrease your tax liability. All of this will be discussed with you during your tax planning session.
Effective tax planning isn’t a one-way street where your accountant works independently of you. Having your ideas, input and conversations makes the whole process even more valuable.
If you want to know more about what value you get during your tax planning meeting or have more questions concerning the tax planning process, call Tax Partner, Mike Agresti, at (714) 672-0022.