Are you exercising the right strategy in your tax game? Similar to an NHL season, tax preparation is the culmination of strategy and effort exerted not just during games but behind the scenes year-round. In both today’s competitive sports and the ever-challenging business landscape, there’s no such thing as “off season.” Proper preparation should be a focus throughout the year to make sure your game plan and execution are as effective as possible. Here’s how.
1. Get “coached up”
Schedule appointments with your advisor around the middle of the year, at the end of the year, or even both. In certain situations, meeting more than twice might be the best course of action. During these conversations, your advisor can work to project the liability you’ll be facing and in turn help determine opportunities for minimization and adjustment.
2. Pay attention to the playing field
The other team’s playbook is constantly changing with new updates and regulations, and the Tax Cuts and Jobs Act made a significant set of changes to the U.S. tax code. Allowing yourself to become “out of the loop” could be a costly mistake.
The regular season
Once the game starts, there is no turning back and little time to strategize or make adjustments. The following steps can help condition your tax season efforts:
1. Be ready to go
“If you fail to prepare, prepare to fail.” Your preseason efforts should have prepared you to deliver to your advisor all of the necessary information and documentation you need for a smooth tax season, organized so that the X’s and O’s don’t get lost among the receipts and W-4s.
2. The gloves are off
Don’t wait for the bad guys to strike: Make your moves first. Filing your return as early as possible helps ensure you get what’s coming to you — and the crooks get nothing.
The season might be over, but you’re not done just yet
1. Crunch time
You just found out you’re being audited. Time to get your best player in the game — your trusted advisor. Interacting with the IRS can be time-consuming and, frankly, a bit overwhelming. A tax advisor can minimize your efforts and put this often worrisome process on the fast track to a positive conclusion. As a seasoned pro, your advisor will know what documentation will be required and have experience in the entire process in general.
2. A winning season
Great news! You received a refund. This shouldn’t be too much of a surprise: nearly 8 out of 10 taxpayers receive refunds and the average amount was $2,727 in 2018. Take time to consider your financial goals and evaluate where the funds would most benefit you, your family or your business. A winning season looks great in the record books, but building a dynasty takes more than one year.
The right coach matters
Due to the complexity and ever-changing nature of tax rules, regulations and requirements, it’s more important than ever to borrow a page from pro sports and seek out coaches who specialize in various fields. Hockey teams can have head coaches and goaltending coaches; in pro football, there are coaches for the offense, defense and special teams, to say nothing of specialty coaches. Will you need as many? No, but being aware of what’s out there might be a big help depending on your specific situation and/or industry. A few areas of tax that businesses find beneficial to have individual advisors for are:
- State and local tax – If your business is operating in a multi-state arena, the rules and regulations per state can be tricky to keep track of. Advisors in this area will be beneficial to ensure you are providing the right information and can help minimize your taxes.
- International – In order to minimize your tax burden and streamline efforts for your cross-border business, advisors can advise you in areas such as transfer pricing, foreign tax credit planning, cross border mergers and acquisitions.
- Research and development tax credits – Qualifying for tax credits can significantly benefit your outcome. Depending on your business’s production, an R&D tax advisor will find where you could capitalize.