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It’s the MOST Beautiful Time of the Year...Tax Planning Time!

Updated: Dec 1, 2021

I bet with a title like that you thought this blog post was going to be all about how magical the holidays can be and, while that is definitely true, it’s an even more magical time of year if you can reduce the amount of taxes that you’re going to have to pay. Solid tax planning and implementation of advanced tax reduction strategies BEFORE year-end are the gifts that keep on giving….year after year after year.

If you are new to tax planning or aren’t sure what this is all about, I’m going to give you the inside scoop as to what the process looks like and also provide a list of key tax planning topics that you should be discussing with your CPA every year.

Tax planning begins by collecting financial information about what has occurred year-to-date in your business and, if your entity is a pass-through for tax purposes, what has occurred year-to-date for you personally. Since the majority of owner-operated businesses are pass-throughs, we’re going to be primarily using this scenario in our discussion.

So, for the business(es) you operate, you’ll want to make sure the books are updated through October (and that means bank accounts reconciled and the whole month-end close process completed….if that’s not happening monthly then, well, we have a whole other problem to address and you’ll just have to call me so I can explain why routine accounting records are the key to your business’ success). Also, you’ll need to project sales, cash collections, additional expenses or equipment purchases that will occur in November and December. Depending upon the basis upon which your business files taxes (cash or accrual), convert the net income to the appropriate basis. Do this for each business.

Next, gather your personal financial information – paystubs (wages, FIT withheld), estimated interest income, estimated capital gains, expected K-1 income, estimated itemized deductions, estimated tax payments. Pretty much everything that was on your 1040 from last year will need an estimate for what the current year is going to look like PLUS anything new for the current year.

Once you have all this information gathered, then work up a draft tax return and plug in all the current year data. Boom – you have projected your tax liability…..are the angels singing or do you need a Christmas miracle?

Let’s just pretend that taxes due are bigger than the giant pile of gifts that the Grinch stole….and you aren’t feeling nearly as jolly. Don’t lose hope….now comes the creative and fun part….brainstorming all of the things that you could do to influence this tax liability. What’s next is going to look a little bit like Santa’s list…it’s long but there are many, many things to be thinking about.

  • Entity structure/organization

  • Deductions/purchases and expense acceleration (for cash basis taxpayers)

  • Cash receipts and income deferral (for cash basis taxpayers) or income shifting/tax bracket management

  • Tax incentives and credits

  • Optimizing the Qualified Business Income deduction

  • Possible changes in accounting principle (inventory write-off, depreciation, moving from accrual to cash basis, etc.)

  • Putting kids on the payroll

  • Looking at risk that is not currently insured and setting up your own insurance company

  • Eliminating underpayment penalties

  • Harvesting capital losses to offset capital gains

  • Leveraging charitable giving in high income years

  • Using retirement planning as a tool

  • Harnessing unused losses or carryforwards

  • Looking at eligibility for Health Savings Account

  • Consider deferring real estate tax payments to next year

  • Looking at possible Net Operating Loss Carrybacks

This isn’t an exhaustive list but it should definitely help you and your CPA to begin really THINKING about what you are doing at year-end. If your CPA doesn’t have a clue about any of this when you start talking about tax planning, then you are not working with a professional that is focused on positively influencing your financial future. It’s important to recognize the difference here when selecting this advisor….the past is a great lagging indicator but it’s what’s ahead that is important to manage.

While we are making lists, you’ll be on Santa’s nice list if you also take the time to contemplate these other areas which are connected with your future financial security:

  • Estate plan/will updates

  • State income tax/sales tax compliance

  • Budgeting/forecasting

  • Buy/Sell Agreements & Funding

  • Life Insurance Policy Evaluation

  • Marketing Plans & Strategies

  • Employee Handbook Updates & Signoffs

  • Business Continuity Plan

  • Insurance Coverage Analysis

  • Employee Talent Acquisition & Retention Strategy

  • Strategic Planning (Getting Intentional!)

  • Moving to Metrics-based Management

I know, I know….this is a lot of work, but it’s necessary to leading a world-class organization and to ensure you are doing everything in your power to keep your money, get a return on your money and keep risk away from your money. Just like Santa, you will need elves in your business to help out. So, surround yourself with a top-notch leadership team and a circle of key advisors who help you run the best workshop on the planet.

If this blog post leaves you wanting more information, feel free to email me at or call me at 469.865.1040 x123. In the interim, may your days be merry and bright and may all your tax bills be light!

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Building on her experiences as an auditor, Susan Bryant, works with clients to bring efficiency and discipline to the accounting function in their businesses through the use of our outsourced services. She thrives in crafting personalized and innovative strategies that allow business owners the freedom to dream big, focus on growth, and plan for taxes. As principal for MB Group, Susan has helped MBG to steadily grow to serve over 600 business owners, solopreneurs, and high net worth individuals. Outside the office, you’ll often find her in the kitchen cooking up a new recipe or running to keep up with her two teenage daughters.


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