September 7, 2021

Start Tax Planning Now: It’s Never too Early or Late

by Gulzar Ahmed, Client Advisor

Some people are inclined to put off talking with their dental CPA firm because they don’t want to talk about taxes. I get it – outside of accountants, who actually likes talking about taxes? Most people see it as a necessary evil. But looking at it from a different perspective, you can make the case that taxes are a good problem to have. If you owe a lot in taxes, that means you’re earning a lot of money. The opposite is also true; if you don’t owe taxes, you’re not making money. So, while it may not be fun to pay taxes, it’s part of being successful, which is a good thing.

My point is that no matter what we’re dealing with in life, it’s easier to do it with a positive attitude. If you’re someone who tends to procrastinate or avoid topics that have a negative vibe, I hope you’ll take this to heart. Now, let’s talk tax planning!

If You Earn More, You Owe More, So Plan for It

It truly is never too late or too early to plan for taxes. I’m not going to lie – earlier is better, but whenever you decide you’re ready to talk to your dental CPA firm, there are things we can do to help.

To understand why early is better, consider a scenario where you had a great year, collections shot up and now you owe taxes on $100,000 more income this year than last. Increased profits are terrific, but if you’ve been making quarterly payments based on the previous year’s taxes, April 15 is going to bite. We’ll work with you to make Tax Day less stressful. For example, to lower your tax obligation, we’ll discuss strategies such as increasing the contribution to your retirement account or purchasing additional equipment for the office. Whichever approach makes sense, the more time there is to plan and execute, the better. Look at it this way – it’s easier to buy $100,000 of office equipment over three months than in three weeks.

Good Planning Requires Good Communication

Like most things in life, good tax planning starts with good communication. Our firm has quarterly touchpoints built into the schedule to help us with formal tax projections. Not all of our clients take advantage of those meetings, but they should because that’s where we begin to see if we need to plan for higher taxes. Here are some of the topics we discuss:

  • Revenue – up or down?
  • Expenses – up or down?
  • Staff – has it increased?
  • New partner?
  • Building out a new office?
  • Equipment purchase – any big-ticket items?

Most of these questions are easy to answer – you know if you increased your staff or made big changes in the office. Assessing whether revenue is up or down may be harder to ascertain. The good news is that technology has made it easier than ever to get a handle on the status of your revenue. We like QuickBooks for easy access to financials, but if you use different software, no problem. Pull the information and share it with us.

It’s Never Too Late to Start

Like I said, planning for taxes early is the best option, but even if we start late, it’s still worth it. We all know December 31st is the hard deadline for making deductible purchases for the current year. If you contact us before then, you still have a chance to take actions that would reduce your taxes. But even if you wait until January, we can talk about what needs to happen before April 15th and get a jump on tax planning for the next year.

Don’t worry if you’ve put off calling – what’s important is we’re talking. In the end, that’s the first and most important step to making good choices that will help with your taxes.

At Engage Advisors we want to help you address the tax challenges that come with a successful practice. Contact us today and we’ll answer your questions about taxes and help make a plan that moves you towards a financially secure future.