Many people think that December 31st is the date they need to start thinking about their tax for the past year.
Sadly, this can cost them a lot of money.
You see, once December 31st passes, it’s like the horse has bolted. You can shut the gate, but it’s too late. After December 31st there is very little you can do to minimize your tax liability for the recently completed financial year.
By taking action, before December 31st, however, there is often a lot of scope to do things that will reduce your tax liability for the current year.
And by ‘before’, we don’t mean December 29th!
To do a thorough job with tax planning, the process needs to begin in early November.
And that time is upon us. Why November? It provides us with 10 months of actual, solid income, expense and profit figures to work with.
Ask yourself, do you find it difficult to manage your practice and cash flow when there is an unknown tax debt looming in the not to distant future?
You are not alone. Many practice owners and individuals are asking themselves questions like, “What tax will I have to pay this year?” Or, “Have I put enough money aside for my Federal and state tax balances owed?”
These are common ‘stay awake’ questions for practice owners. Very stressful.
So, what can you do about this?
Take action now, not in December and certainly not in January!
It is especially important to start planning early if there is a potential tax liability.
Your first step is to ask your CPA at McGaunn & Schwadron to review your financial data for the January to November period to determine your taxable profit. Then, with an understanding of your practice and its seasonal fluctuations, we prepare a projected practice profit for the remaining 2 months (November, December). This will give us a profit estimate for the full financial year.
From here, we know the likely tax position of the practice and of the related parties (you, other shareholders or LLC members). We then discuss with you different scenarios and moves you can do before the end of the tax year to help minimize your tax.
You will then have a clear picture of your tax liability and when it will be due, which means you will find it easier to manage your cash flow.
It also gives you that comforting sense of certainty.
As a practice owner, the tax planning process gives you options and clear actions to implement or consider well before the December 31st deadline. This means there are no last minute ‘knee jerk’ decisions and actions that you might later regret.
It also means you can focus on your practice, and not worry about your tax standing.
After all, there are better reasons to ‘stay awake’, aren’t there?
Here’s what you need to do to start your tax planning process with us:
- Ensure your accounting records are up to date to October 31st.
- In November arrange for us to review your profit for 10 months and project the income and expenses to December 31st.
- We will then arrange a time to meet or hold a conference call with you to discuss the profit estimate and advise you on your tax planning options well before December 31st.
More restful nights’ sleep for you lay ahead. Call us now at: 781-489-6651 or email us at: email@example.com to make a time to meet and discuss your options.
Mark J. McGaunn, CPA/PFS, CFP® leads the veterinary/dental/financial planning divisions at McGaunn & Schwadron, CPA’s, LLC and can be reached via firstname.lastname@example.org or (781) 489-6651.