4 Tips to Get the Most From Your Tax Planning

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I need to begin the article by explaining how many times I have heard a company's tax adviser make a comment like this after the year is over for which they are preparing the taxes: "If only you would have talked to me last year we could have saved you some taxes." In addition to this reality, I have yet to see a business that faithfully and correctly engages in tax planning that does not save a significant amount of money — far in excess of any costs inherent to this planning.

Most entrepreneurs and business owners do not engage in tax planning in a meaningful and high-impact way. To help you overcome the barriers to completing this activity as well as to ensure it is effectively executed, here are four tips to implement to make your tax planning efforts fruitful:

1. Define Your Objectives

One of your objectives should be compliance with the obligation we all have to honestly and accurately account to and pay the taxing authorities. If you desire to avoid paying the taxes you owe, then I'm afraid the best tax planning will ultimately not help you. You need to be realistic with your objectives and not expect to pay zero taxes on millions of dollars of pre-tax net profit.

2. Seek Professional Guidance

I hope you are not a business owner or entrepreneur that is still doing your company's tax return. You need to hire a tax CPA to perform this function as well as give you guidance and direction in your tax planning efforts. These professionals spend every day of every year being experts in the tax code, and they spend weeks of their time every year keeping up with the changes to and complexities of the rules and mechanics of how the various state and federal agencies tax you and your business.

In addition to your tax CPA, you may want to consider an additional professional who can, perhaps, help design and implement tax planning strategies and concepts of which even your highly trained tax CPA may not have thought. Sometimes even the best tax CPAs can get so caught up in processing your tax returns and keeping you compliant that they are not able to think outside of the box relative to your situation. It might be a partner in the same accounting firm, or it may even be an independent adviser. Whoever it is, make sure they are creative and willing to at least contemplate some out-of-the-box ideas. Then your tax CPA can scrutinize their ideas and either approve or disapprove based on the application of the tax code to your situation.

3. Timing and Frequency

At a minimum, you should have a face-to-face meeting with your tax CPA in the last or second-to-last month of your tax year. For December 31st year-end companies, that means November or December. At a maximum, you will want to meet with him/her each quarter to determine your quarterly estimated tax payment requirements (both penalty-free and total estimated liability payments so you can plan for cash flow) and when you have any other major occurrences in your business that could have significant tax implications (like asset sales, acquisitions, new entity creations, and more).

4. Estimate Your Year-End Results

Your tax CPA will be uncomfortable projecting the income you will receive from your business when they do your tax planning. They prefer you to know what this will be and send it to them before the meeting so they can begin to prepare their thoughts and strategies. Based on if you are a cash or accrual-basis filer, take your actual performance through the most recently closed month of the year and project how you plan to do the remaining months of the tax year. Include details about equipment and other capital expenditures (so the tax CPA can begin to think about Section 179 deductions) and any other material change in your business during the year that could impact the way the business reports or classifies its income and/or expenses.


The common hesitations business owners have to following these steps of tax planning is the cost of the professionals and their own time to properly estimate the year-end results of the business and meet with the tax advisers. If done right, you will most likely receive far more benefit from the time and money you invest into this process than you will ever spend to do it the right way.

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