Taking control over your business and individual tax situation has beneficial consequences.
- At worst, knowing what the tax impact of the current year might be and planning for the inevitable tax payment due.
- At best, knowing what the tax impact of the current year might be and evaluating the best strategy to manage the tax liability.
The first step to taking control is to get organized.
For your business, verify that the bookkeeping has been caught up to date and the latest bank and credit card statements have been reconciled. For those businesses that use the cash method of accounting, consider recording the unpaid vendor invoices and credit card transactions to determine the full extent of your future cash basis deductions. Simply paying what you already owe can help reduce your current year tax liability instead of rushing out to spend money on what can be postponed until next year. Managing cash flow is important too. Review your Balance Sheet for accuracy and adjust account balances as needed.
For your personal income and deductions, gather your latest statements received, such as payroll stub, brokerage and bank statements for interest, dividend and stock transaction income, mortgage statements for mortgage interest and property taxes, paid, etc. Whatever recordkeeping system you have designed, get it together and up to date. Having your documents at-hand and organized is a huge time saver.
I recommend reading a summary of the current tax law changes and updates, so you will know how the current year income tax rates, tax brackets, etc. will impact your current situation. My clients receive newsletters to keep them informed. It can be very helpful to pull out last year’s tax returns to “pencil current year activity out”. The draft copies of the current year tax forms may also be available to use. You will want to evaluate your business and personal tax situation for the current year and how changes in the future might impact your business and you.
Taking a proactive approach to take control over your business and individual tax situation can provide valuable insight on which you can take action. The value of evaluating your options and developing your strategy for the current year and next year can be well worth your time.
Personally, I schedule time with myself every year to work on my own year-end tax planning projections. I am always glad I did.
If you believe there is value in taking a closer look at the details, this is a great opportunity to contact your tax professional to discuss the cost and benefits of engaging them to prepare a year-end tax projection for you. The best time to tackle this projection is early December or late November; both time periods provide lead-time to prepare, evaluate and develop options on which you can act. After December 31, most options disappear.
