Effective Tax Planning Means Calling Your CPA Firm More Than Once A Year

In the first weeks of each new calendar year, your tax documents for the prior year start coming in the mail. As April 15th begins to approach, you likely think about scheduling a call with your CPA firm. Although touching base before the deadline is important, did you know effective tax planning often requires you to converse with your CPA firm more than once a year? Planning ahead for a life event can lead to significant tax savings as opposed to making adjustments and hoping for the best after the fact. How a change or event could affect your financial health is essential to understand, and so is having a grasp of all of your options before taking a financial leap or as you plan for an expected life event.        

Communicate changes in your family structure.

Changes to family can be joyous and welcomed or stressful and dreaded. If you are getting married, planning ahead of merging your assets and finances can help you limit your tax liabilities and set up your financial accounts accordingly. In the event of a divorce or separation, you will need to plan for the tax implications of just the opposite. When you are expecting a child, there may be tax breaks available. Tax-saving strategies can help you plan for a child or grandchild’s future. Should your teenager get a job, you can set up an IRA in their name and contribute an amount up to the taxable wages. In unfortunate times, such as the death of a spouse or parent, there will be income tax, estate tax, and retirement considerations. There are tax consequences to consider if you are the recipient of an inheritance as well. 

Reach out if you plan to move or buy or sell other investments.

The sale or purchase of a home is a significant financial event. You may be eligible for capital gains exclusions or mortgage interest deductions. If you plan to receive rental income, the tax implications become more complicated. If you plan to purchase a home or start a business in another state, you will need to understand residency-related tax matters. When you sell an investment, you will be subject to capital gains tax; however, timing can significantly impact the tax consequences of investment activities.  

Pick up the phone when your income or work situation changes.

When your income changes, your tax bracket could change as a result. Projections can help you determine where your income will fall, if you will reach the threshold for Alternative Minimum Tax, and what the effects on your estimated income tax liability could be. When you start a new job, you want to be sure you set your withholdings correctly. Plan to start a business? You may be subject to self-employment tax based on the type of entity, or you may be eligible for Qualified Business Income deductions. 

Talk about retirement and your legacy.

Retirement planning can start as early as you would like. Opting for an Analysis of Pension Benefits can help you determine the safest and most lucrative options based on your retirement timeline. In a year of lower income, a Roth IRA conversion may be beneficial. Projections and planning are key to staying ahead of potentially adverse effects on your taxes. You may benefit from an analysis of tax implications of wealth transfers, fiduciary responsibilities, and trust or charitable foundation creation as you plan for your estate. 

Contact Livingston & Haynes 

Proper guidance and service are crucial to meeting your family’s collective financial goals, helping your businesses prosper, upholding your fiduciary responsibilities, and minimizing your tax burden. My team of individual tax specialists provides comprehensive individual tax preparation services, including those that extend to families, family offices, and related ventures. 

Making sound tax and financial decisions that affect your family and your business requires year-round attention to current and changing tax law – not just when a filing deadline is approaching. Contact me today, and throughout the year, to talk about your tax planning strategy. 

by Debra Christensen, CPA

Debra Christensen, CPA, joined Livingston & Haynes, P.C. in December 1999. Prior to joining L&H, she held a staff position at a public accounting firm in Springfield, MA and spent many years in private industry. Debra became a Partner in 2012 and the Managing Partner of the Ware office in 2019. She provides audit, tax and business consulting services to a diverse clientele. Debra works primarily with individuals and nonprofit organizations but also has experience with small privately held companies including retail and manufacturing.