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Now is the time for tax planning

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Now is the time for tax planning

By: Amanda Yantosh, CPA

Itís November, and most of us would rather be talking about turkey than taxes, but good planning this month may well have us giving thanks at the end of the year.

While the deadline for filing your next tax return is many months away, with few exceptions (like making contributions to most retirement accounts) it is the decisions you make and the actions you take by December 31 that will determine your tax liability.

Making decisions now on matters that may have taxing implications will give you time to act on them before the time pressures of the holiday season interfere with your plans.

Smart planning can help you reduce the amount of your taxable income, which can result in a lower tax rate. Understanding which tax credits and/or deductions apply to your business can lead to even greater savings.

As a business owner, you may now be thinking about awarding year-end bonuses, or you may be facing decisions about when to buy new equipment. You may be wondering about how the big job you landed in July will impact your taxes if the payments come in before the end of the year. And, with Congress discussing major tax reform, itís natural to be concerned about how what is being considered may affect your business Ö and when.

As an individual taxpayer, you probably have similar concerns. Do you have losing investments that you can sell to offset any capital gains? Are there tax benefits to donating appreciated assets as you make your year-end charitable contributions? How large a gift can you make to your children or grandchildren without running afoul of federal gift tax laws?

By meeting with your accountant this month, you can discuss which strategies make the most sense for your business or personal situation. To make the most of this meeting, your books should be in order, so you will be giving yourself a head start on preparing for tax season. Also, the meeting will give you a better idea of whether you will need to assemble additional records before work can begin on your tax return.

As the number of end-of-the-year tax questions starts to pile up, you may come to the realization that some of my clients already have: smart tax planning is truly a year-round activity, and a quarterly meeting with your accountant is a great way to keep on top of not only your tax issues but all the other financial issues your business is facing.

Tax planning is the art of learning how to manage your affairs in ways that postpone or avoid taxes. You accomplish this goal by taking full advantage of beneficial provisions in tax laws, increasing your deductions and credits and making good use of all the breaks in the tax code that apply to your situation.

Itís only natural that these matters come clearly into focus at the end of the year and as you are preparing your returns, but there are many business decisions that you make during the year Ė real estate deals, the acquisition of vehicles and new equipment, even the structure of your employee benefit plans Ė that can have tax implications. It makes much more sense to discuss these issues with your financial advisors before making the decisions than to find out later that doing something differently could have reduced your tax liability. Seeking professional tax advice before pulling the trigger on major transactions is often money well spent.

You should not change your financial behavior solely to avoid taxes. What is best overall for your business, or for your personal financial situation, should always be paramount. But the best tax planning strategies are those that permit you to do what you want while reducing your tax bills along the way.

So, resolve now to address your year-end tax questions sooner rather than later and then make it your New Yearís resolution to stay on top of those tax issues in every month of the year.