What makes a “good tax plan”?
POSTED ON August 16, 2023
BY Mallory Sage

Good tax plans are essential to everyone, but no one benefits more than business owners. But what makes a good tax plan? There are a few different factors to consider and each accountant has a different process. Here are the things we at Encurio believe are essential pieces to a good tax plan.

Considerate Projections

A good tax plan will have a well thought out projection for your business. Projections should be reflective of a real-world scenario. This may mean that your projection is based on year-to-date numbers with a thoughtful forecast for the rest of the year. If your business is unpredictable, your accountant may rely on other factors like numbers from previous years to make conservative estimates.

Large Transactions

Your accountant should always be aware of large purchasse made for you or your business. This includes things like buying new equipment, cars, homes, investment properties, or even equity in other businesses. This should absolutely be included in the discussion of your tax plan, since there may be tax benefits or consequences to these large transactions.

Life Changes

Are you getting married or divorced? Did you get a new job? Have you had unexpected medical expenses? Did you welcome a new baby into the family or is one on the way? All of these changes can have tax implications, so it’s important to include them in a good tax plan.

Evaluation of Your Current Strategy

What has your strategy been for your business up until this point? Is it still working for you? Checking in on the status of you current tax strategy is important. Sometimes your priorities may change or you may experience a change in income. Your strategy should be adjusted to reflect these changes so that you’re making the most out of your tax plan.

Retirement Funding Options

Make sure to take a look at your current retirement funding – and other options that are available. Checking in on this yearly will help you maximize your retirement savings. It will also help you adjust to any life changes that may effect your retirement.

Your Pay

How much are you paying yourself through your company? Are you paying yourself? Why or why not? A good tax plan will look at how much you’re paying yourself and help you optimize as part of your ongoing tax strategy.

Review Major Tax Changes

Tax code is always changing. It’s your accountant’s job to keep up with what’s changing and how that may effect you. During your tax planning meeting, your accountant will make sure you’re informed of any credits, deductions, or regulatory changes that might effect your return.

What You Owe

Tax planning will give you an estimate of what you should expect to owe in taxes for that year. But a good tax plan goes a step farther by helping you strategize when and how you should pay based on your cash flow. Your accountant will advise you on when the best time to pay would be based on safe harbor rules – and what to expect if you decide to pay later.

A Good Tax Plan Leaves No Surprises

After your tax planning, you should leave with absolute clarity on how much you will owe in taxes, when to pay them, and what action you need to take before the end of the year to make sure that plan happens. Good tax plans will give you an estimate in the ball park of the actual taxes due (give or tax 20%) and should leave you with no surprises on the horizon. But a good tax plan only works if you do your part by implementing the plan on your end.

If you’re an Encurio client and you haven’t had 2023 tax planning, reach out to us today! And if you aren’t an Encurio client, but you’re interested in joining us, try setting a meeting to learn more about how we can help you and your business.