Great works are performed not by strength but by perseverance.
~ Samuel Johnson
This week we complete our series on the value-added tax planning services which are perfectly suited to do during the off-season months.
Let’s dive right in and explore some of the services you didn’t know you could benefit from.
Applying for or adjusting an existing installment payment plan with the taxing authorities
Have you considered asking your accountant to assist in guiding you to get the best plan available to you? Yes, even this can seem easy to do on your own, but, there is strategy involved with this as well.
Not all tax accountants specialize or have experience in representation services. Check with your advisor if they have continuing education or certification in this area. Some advanced courses are as long as 30+ credits and are proctored by tax attorneys specializing in this field.
Choosing or switching entity types
This is the trickiest area of taxation, and takes a lot of core know-how to be able to guide a client to choose wisely. The type of entity you choose can make a world of a difference.Entity Types
Additional traps for the unwary can include not understanding the individual’s specific tax situation and how other factors can impact the type of entity to ultimately choose.
Some examples that play a role in the advice can include having other items of income (besides the business flow through items), a working spouse that is a part of the business, and state and local tax rules and regulations for businesses.
Practical tip: Don’t just take their word for it – make sure that before your tax professional gives you a specific answer as to which entity type to go with, they should also be able to show you the results in a tax projection comparing the multiple entity types, and if at all possible, make sure the advice is documented in a formal letter. Ask for the letter to specify how the results are personalized to you, and are built upon your individual unique situation.
Also, check if there are any tax law changes in the works which may impact the taxation of the entity you are considering. Most importantly, consider business reasons for the entity type you choose, don’t let the tax tail wag the dog!
Taking advantage of deductions
Finding deductions that you never knew you had, is what separates a true professional from a novice. The tax code is quite complex, and there are so many ways to lose out on what is rightly due to you, we can have a separate book written on this topic alone. In fact, there are many books out there written specifically on this. One has to realize that many deductions have to be put in place at the right time, and once the tax year is closed, it may be simply too late. A good tax pro will also know how to take a deduction, or how to audit proof a deduction, or how to create a deduction where there was none available at the time.
A common example would be as to how to best take a home office deduction. Did you know that there are three different ways to claim a home office deduction, and depending on which one you may take, can potentially impact everything from increasing the chances of you being audited to not being able to actually benefit at all?
Check out this link if you haven’t run across this article at some point in your search for great tax advice:
Always consult with your tax professional before you make any tax decisions, as your choice may depend on your specific situation, and the tax savings outcome may vary on a case by case basis.
Major life changes
Getting married, having kids, or divorce proceedings will have a profound effect on your personal life, and you are well aware of this, but don’t forget to consider the tax implications. There are so many pitfalls here, it is almost a mine field of potential issues waiting to happen. Don’t wait until the last minute to seek help. It may seem like the last thing on your mind at the time, but shortly before or after a major life event, visit an experienced accountant’s office, hopefully they can help lend some friendly life advice and also help you avoid some of those common pitfalls.
All of these areas are very complicated and take many years of practice to get a firm handle on. Ask your tax professional if they have had any formal training in tax planning, if they have read any books on the matter, and if they can give you some examples of how they have saved their clients tax dollars in the process.
I bet you are now seeing how valuable our planning services can be. At the end of the day, remember, a good tax professional will save you more dollars than what you pay him or her, and most importantly give you a peace of mind that your taxes are in good hands.
Please do not hesitate to reach us at any time to review your specific individual or business tax situation. We are always glad to help you.