Implementing The Tax Recommendations From Your Cpa
This week, let's get into the details of the first one.
Planning Tip #1:
Implement the tax recommendations from your CPA
When my team prepares a tax return, we are not just focused on that one year. We are also looking for tax saving opportunities in future years. Now is the ideal time to discuss these opportunities with your CPA.
Tax Saving Opportunities to Discuss with your CPA
Here are just a few of the tax saving opportunities we recommend to clients after preparing their tax returns.
Protect Your Tax Savings with Annual Minutes
When you receive your tax return from your CPA, do you get anything besides your tax return?
When the ProVision team completes a business tax return, we include a Minute Checklist. A Minute Checklist includes key items the ProVision team found during the tax return preparation that should be recorded in the company's minutes.
Minutes are a powerful tool to protect your tax savings and tax strategy!
Annual minutes summarize the activity for a year. This is an ideal place to document the activity in your tax strategy, such as:
Your salary
Your bonus
Your distributions Loans to/from your company from/to you or your other companies
Investments purchased
Investments sold
Travel expenses
Vehicle expenses
...just to name a few!
Imagine an auditor's reaction when you hand over your company's annual minutes that support the deductions being questioning.
Now is the time to complete your minutes and protect your tax savings! If you aren't sure what should be included in your annual minutes, discuss this with your CPA.
Create Better Information for Greater Tax Savings
Information is powerful when it comes to reducing your taxes. The better the information, the greater the tax savings.
This includes the information that goes into your recordkeeping. Areas that are the biggest offenders include:
Home office Travel Vehicle Meals & entertainment Depreciation Real estate losses
If you aren't sure your information is as good as it can be, ask yourself this question:
If you were audited today, would you be able to successfully support the deductions on your tax return?
If you answered no, then now is the time to discuss how to create better information with your CPA.
Add an Entity
Adding an entity is not always as simple as filing the paperwork with the state. Yes, that legally forms the entity but for tax purposes, there must be a business purpose.
Many times the business activity I see on a tax return justifies adding an entity because it can help achieve business goals that also work with the client's tax saving strategy and wealth building strategy. It is critical to capture this opportunity timely!
Remove an Entity
I am a big believer in having as few entities as possible to achieve your goals. This may mean 1 entity for some people and 10 for others. I have recommended to many clients that they dissolve an entity because the purpose it serves and the benefit it creates doesn't justify the additional cost of having it.
Review Ownership of Assets
Tax returns are a great annual check to review how your assets, including your entities are owned. The tax forms and other information you gather to have your CPA prepare your tax return often reveal how your assets are titled.
Ownership can have a huge impact on tax savings. For example, if your business reimburses you for the business use of your vehicle, then your vehicle should be titled to you (and not your business)!
Ownership issues commonly come up with estate planning. Too many times a living trust is set up and title to the assets is not properly transferred to the living trust. This can create a mess for the heirs and is something that can be easily resolved if addressed timely.
I recently wrote a special report on a client's planning success story and a huge part of the success was in following through with his estate planning by making sure the ownership of his assets was in line with his estate plan.
Now is the ideal time to discuss these ownership details with your CPA!
The best opportunity to reduce your taxes comes from planning your taxes not only throughout the year, but years in advance.
by: Tom Wheelwright
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