Consequences of Failure to Plan

What is tax planning? At a very basic level tax planning is looking ahead and determining your future tax liability to be and using that information to make decisions. You can use this information to decide how much to set aside for your taxes. You can also use this information to explore various tax saving strategies.

When you know what you expect regarding your taxable income, and the estimated tax itself, you can plan ahead to see if you need to start a payment plan or move money around and alter your savings plan. 

If you plan far enough, you can make adjustments and changes. There are many taxing strategies for small businesses and entrepreneurs, but also at the individual level as well. Often, looking at your estimated tax prior to your end can help you adjust and take advantage of an opportunity That you might want later, but you no longer qualify.

Towards the end of March, we turn our focus from preparing tax returns adding the info we have into the software to come up with the best estimate for tax liability that we can. Unfortunately, in this case we had so little information that even at the tax deadline we didn’t Have enough information to prepare a calculation for extension payment. 

This year, a client submitted minimal information for their tax return. Then they reached out to me a day or two before the tax deadline asking me what they could contribute to their retirement to get a deduction. The deduction they were referring to is based on your adjusted gross income, which is calculated in the tax return. We didn’t have enough information from them to determine this, so we were unable to tell them what they could contribute to their retirement account. Because they did not plan in advance and have their information ready, they had to forgo this tax deduction that they very likely qualified for.

Unless you plan ahead, you could be leaving your money with the taxing authorities. If you don’t have a CPA helping you, and you would like to schedule a tax planning consultation, please feel free to reach me at catherine@cowartroecpa.com or 504-252-0652. I would love to help you out.