It’s time to up your tax game!

We are in the 4th quarter. At this point in the year – it is pretty obvious what your income will be for the year.  Is your tax obligation for this year going to be a score or are you going to fumble the ball?

It is time to implement last-minute strategies and go in for the win!

Yes, you can still make changes that will impact and minimize your tax liability for the year!

Why Do You Need Tax Planning? Every taxpayer knows the weight that paying taxes can put on one’s financial income. Tax Planning helps you make decisive monetary moves that ensure tax efficiency. Making these smart moves is crucial for your success.

Gazing into a crystal ball would be more tax planning than what is done by the average taxpayer because many do not even realize exactly how much tax they are actually paying.

It is surprising how many people will say, “I didn’t pay any tax – the IRS sent me money!” While this may be true for a few people, who qualify for the Earned Income Credit, for most people, it means they have given the Internal Revenue Service a free loan of their money. The bottom lines on the various 1040 Income Tax forms that say amount you want to be refunded to you “$______” or “amount you owe  $_____” are just an indicator of how well you did or did not do your tax planning.

The line you should most concerned with is above that slightly; the one that says, “This is your total tax $_______.” You want to keep this number as low as legally possible.

Tax planning since the “Tax Cuts and Jobs Act 2018 is SO MUCH MORE IMPORTANT THAN EVER!”

There are basic tax planning concepts everyone should know.

• You should understand your tax bracket.
• Be aware of popular tax deductions and credits, and understand the difference between them. (Hint, deductions are wonderful, but tax credits are your best friend!)
• Tax strategies to shelter income or cut your tax bill
• Will you be taking the standard deduction or itemizing, and why?
• Know what tax records to keep.

Maximizing the taxpayer’s wealth is the primary intent of effective tax planning.

The secondary goal of effective tax planning is to reduce or defer the tax liability for the current tax year.

Tax planning is a MUST for:

1.)  Everyone that has positive income on a Sole-proprietorship business, an S-Corporation K-1, a Partnership K-1, or any other flow-through entity. The Qualified Business Income (QBI) deduction is a BIG deal. You will need personal guidance to know how this new tax break will apply to your situation. Proper planning can save you thousands or tens of thousands of dollars in tax savings in just this one tax deduction!

2.) Anyone with a significant change in income or another event that would alter one’s tax situation should consult with a professional to adjust the tax that should be paid to the IRS.

3.) Anyone whose annual income is nearing the lower QBI income threshold ($157,500 for single taxpayers and $315,000 for joint filers) amounts for the tax year.

4.) Everyone else!

All business owners should consult with their tax professional a minimum of two times during the year – mid-year and fourth-quarter to make sure they are on track for proper payment of tax during the current tax year.

Without the proper tax planning, going to your tax preparer at the end of the year is similar to going to the dentist, without brushing your teeth daily. You are saying, “Here it is – fix my mess.” All the dentists can do is mend, repair, and replace the damage with the tools of his profession. All the tax preparer can do with his instruments is revamp the tax disaster you have created for yourself in the past year. It is truly a case where an ounce of prevention is worth a pound of cure!

Depending on your situation, but definitely, if you have a sole-proprietor business, corporation, or other entity, it is vital to have quarterly or semi-annual planning consultations with your tax professional. It may cost you a few dollars in consultation fees, but literally, it could save you thousands of tax dollars a year!