What’s Better, Getting Your Taxes Done or Tax Planning?

December is the most popular month of the year to do tax planning. Small business owners and landlords who have had a strong year or years may be looking to shelter extra profits from taxation by putting new business assets into production or replacing old ones with section 179 expensing expiring in 2011. If investors or retirees have had an investment windfall they could be looking at the tax planning benefits of gifting to charity and family members. And, this is typically the type of tax planning tips that writers look to write about this time of year

After taking care of any year end moves to make for 2011, the smartest small business owners, investors, landlords and retirees are planning out their taxes for 2012. They understand that tax planning is like farming. What you plant the year before is the crop you will live off of throughout the next year. You may think of the harvest as dividends.

I usually give the example when I talk to a business group or do a live webinar, “If you didn’t know you could deduct your kid’s braces in April of next year for the previous year, there is nothing that can be done to change that. Your money is lost by that time and 4 months of tax savings has already been lost for that year also.”

Smart business owners, landlords, investors and retirees will be receiving dividends from doing December 2011 tax planning in every month of 2012. While end of the year tax planning is well covered in the media, it is the next year’s tax planning that keeps the tax savings coming in for 2012.

Unfortunately, for a very large portion of the tax paying public, they just think about getting their taxes done instead of planning their taxes. This is also known as tax preparation or having your taxes prepared. Some taxpayers may also think of this as tax accounting. This can lead to small business owners, landlords, investors and retirees to over pay their taxes by thousands and even tens of thousands of dollars in a single year.

Taxpayers run their small businesses, rent their houses and apartments and make buying and selling decisions without knowing how muxh they will have to pay in taxes because of their decisions. Quite often an end of the year purchase that a small business owner thinks he can buy on a pre-tax basis turns out not to be that way due to the Alternative Minimum Tax which can affect things like accelerated depreciation.  The pinch of realizing you are going to shell out more to the IRS than you were expecting is their first realization that there might be a better way.

If your small business has been strong for 2011, your vacancies have been at a minimum or your capital gains are at or near harvest, it might still be good to do some tax planning in 2011. With the right tax plan, you could be looking forward to a more profitable 2012 with the peace of mind knowing you won’t be over-paying your taxes. If you think you might not be paying the least amount of taxes as you should, contact me for a 20 minute conversation to see what can be done. The dividends you keep, will be yours.

About this Author 

John Beidle is an enrolled agent who specializes in helping entrepreneurs, small business owners and real estate investors pay the least amount of tax as legally possible.

About The Author

John Beidle

John Beidle is an enrolled agent who specializes in helping entrepreneurs, small business owners and real estate investors pay the least amount of tax as legally possible.

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