Many people have the view that you only see your CPA once a year – at tax time. However, with that approach people are typically leaving money on the table. While keeping clients in compliance is a key role of a CPA firm, a bigger driver of value is the delivery of tax savings to clients. That can marginally be done during the crazy tax season months of February through April, but is better approached during additional annual, biannual or quarterly meetings. We offer all our tax season clients a Growing Forward document that highlights key points and high-level ways that they can save on taxes. It also includes important information on any upcoming tax law changes that could impact them. 

However, detailed tax planning typically requires a more thorough dive into expectations and assumptions for the current year, and is best approached in the middle to latter part of the year, when more of the current year is known. With that approach, a competent CPA firm should be able to deliver tax savings that are greater than the cost of a tax planning engagement.

We need to note that tax planning is not going to be of value to everyone. For some people, there is simply nothing that can be done. We recommend tax planning for business owners, individuals with a variety of investments or rental properties, and for people with unusual tax events or changes in their individual situations.

What does tax planning involve?

There are several steps to the tax-planning process. They include:

• Gathering historical data on which to base or compare assumptions.
• Gathering current year financial data and assumptions.
• Taking the information and generating projections for the current (and potentially) future years.  This is the base as-is-expected scenario.
• Performing a thorough analysis of the projections and known information and making recommendations.
• Using the recommendation to create alternative projections to illustrate tax savings.
• Documenting the recommendations and results.
• Reviewing the results with the client and identifying the necessary course of action for the remainder of the year.

• To have a better idea of what the current and future tax year will look like. At a minimum, the process should remove any unnecessary surprise of tax balances due. In addition, it's helpful in determining if the taxpayer needs to make additional estimated tax payments for the year.
• To get a recommended course of action to reduce the expected tax burden for the current year.
• To get a better understanding of how various financial pieces interact and affect the overall tax picture.