Is Taking Control of Your Taxes One of Your New Year's Resolutions? We Think It Should Be.

Todd Williams, CPA, CVA, ABI December 20th, 2021

For most people, thinking about taxes once a year is plenty enough. We know a lot of work goes into generating reports, hunting for receipts, organizing heaps of paperwork, not to mention dealing with the ultimate tax bill, should there be one.

We’re not surprised that during this season, the issue of taxes often falls way down the priority list for a lot of people. But thinking from a “tax perspective” all year long, and especially as the New Year approaches, can help reduce the headaches of tax season, perhaps even delivering a positive financial result when all is said and done.

In that vein, the best plan you can make right now, at the end of 2021, is to plan regular conversations with your CPA.

That’s right, the best secret weapon you have for effective tax management is… communication.

Yes, it’s important to manage your expenses, investments, revenue, gifts, and every other aspect of your financial life, with a goal of tax reduction. But it’s very hard for laypeople to “know what you don’t know” when it comes to taxes.

Tax laws change every year, just like your situation does. So, the only way you’ll know how to manage your situation – in the context of an ever-changing tax code – is to build a relationship with a CPA, or accounting team, and communicate openly throughout the year.

Regular communication can help eliminate surprises, like missing out on deductions; owing more than you can handle; over-withholding, which amounts to loaning money to the government at no charge; missed opportunities for planning capital gains/loss events; missing out on pension contributions, or incorrectly timing asset purchases for your business. The list of potential mistakes and missed opportunities goes on and on.

So, as we approach 2022, the most important conversation to have with your accountant about the next tax year is the likelihood of tax law changes (again).

Given the cost of pandemic relief, taxes are likely to rise, which makes planning even more important. For example, an increase in taxes highlights the positive potential impact of charitable contributions, especially transferring securities with unrealized gains – but how should you structure those gifts?

The best approach may be a donor-advised fund, which delivers a tax benefit in the gifting year, but offers greater control over the assets as they are disbursed over multiple years. Another example, under the last presidential administration, we had discussed with several clients the possibility of terminating their “Sub S” election in favor of becoming a “C corp.” Under the new administration, some clients may be better off putting those plans on hold.

It’s understandable that people are conditioned to avoid both costs and hard conversations, but working with your CPA on a tax plan shouldn’t be painful – in either regard. A proactive, client-focused tax advisor should be able to work with you, within a transparent fee structure, to build a year-long communications plan that works for you.

Build a relationship that maintains an open dialogue throughout the year, and hopefully the only surprises you’ll get at tax time next year will be good ones.

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Read More By Todd M. Williams, CPA, CVA, ABI

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Investment advisory services are offered through Concord Wealth Partners, an SEC Registered Investment Advisor.

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