Schedule your tax planning session now, and reap the benefits later.
“A goal without a plan is just a wish,” wrote Antoine de Saint-Exupéry.
However, when it comes to our taxes — particularly for self-employed individuals — we’re often left just wishing we owed less because we didn’t plan well enough to make it so.
Covid threw us for a loop in many aspects of our lives, including the economy, but now’s the time to take back some control and start planning to reach your goals for real. And it starts by sitting down with your CPA and discussing smart money moves you can make to reduce your tax burden.
Economic Adjustments
According to the Bureau of Economic Analysis, the first quarter of 2022 showed a 1.4% shrinkage of the Gross Domestic Product (GDP). The rapid post-pandemic recovery led to supply chain and staffing shortages and inflation, which has us all concerned about the economic troubles to come.
Knowing this hurts, which is why a lot of people avoid planning and just hope for the best. When things get tough, it’s tempting to bury your head in the sand and wait for troubles to sort themselves out. But avoiding it won’t make it go away, and with knowledge comes power. That’s why we recommend that clients, particularly self-employed individuals, take advantage of summer, the post-tax-season period, to get ahead of the curve and schedule a planning session with us. Knowing in July that you’ll owe more taxes in April can allow you to make adjustments early enough that it could have an impact on what you owe, and you can plan to save enough money.
I’ve grown especially concerned for many of my small business and self-employed clients. Many were unprepared for what they owed for 2021 and were forced to request installment plans. But not only do these plans add to the amount you owe — interest on short-term plans and interest plus setup fees and penalties for long-term plans — but this is one of the worst kinds of debt out there. After all, unlike a car or house or long-anticipated trip, you don’t even get to enjoy what you’re spending your money on. That year is gone, and you’re still paying for it. This sets up a snowball effect, with last year’s payments piling up onto next year’s, and so on. The psychological impact of this can be huge, not to mention the financial repercussions.
Bottom line: When you meet with Ludmila CPA, we can run the numbers and provide you an approximate total tax amount that you can plan for. We can talk about ways to save or even minimize debts. Plus, because we know that some people are better savers than others, we can help you come up with an estimated tax payment that you can work toward over several months, then schedule payments to help with your cash flow, rather than being hit all at once with a huge annual bill.
It Pays to Pay a Professional
Estimating tax payments is very difficult to do on your own, so working with a professional is advisable for your own protection. Many people retain CPAs purely for filing tax returns, assuming that it costs less overall to avoid paying for what they perceive as extra, unnecessary services beyond filing their yearly returns. However, a CPA knows the tax laws inside and out, so they can often find ways to legally, responsibly reduce what you owe or take advantage of tax-favorable opportunities. CPAs not only receive formal training to earn their certifications, but they are required to earn 40 hours per year of continuing education credits to ensure their skills stay current.
In some cases, we’ve met with skeptical clients whose questions were not only answered but whose tax plans dramatically changed for the better after meeting with us, ultimately giving them a great return on the modest investment of a planning appointment with us … not to mention the huge reduction in their stress levels.
Speaking for myself, one of the most enjoyable parts of my job is talking to a client who presents me with challenging questions and being able to provide reassuring answers — it’s incredibly rewarding. So contact us today, schedule your summer tax planning session, and bring us your toughest questions — we’re ready!