Year-Round Tax Planning
Tax planning is easier when it happens throughout the year rather than beginning shortly before a return is due. Keeping financial records current and reviewing your tax situation periodically can help you understand upcoming obligations and reduce last-minute surprises.
Keep your financial records current
Useful tax planning starts with accurate financial information.
When bookkeeping is several months behind, it can be difficult to understand how the business is performing or estimate what its tax situation may look like.
Keeping income, expenses, and account balances current gives you and your accountant better information to work with during the year.
Understand estimated tax payments
Some individuals and business owners may need to make estimated tax payments during the year.
The amount and timing of those payments depend on the taxpayer's circumstances. Changes in income can also affect whether previous estimates remain appropriate.
Rather than waiting until filing time, periodically reviewing your situation can help determine whether estimated payments may need attention.
Monitor income and expenses
Business results can change considerably during the course of a year.
Reviewing income and expenses periodically can help you identify whether the business is performing differently than expected.
Significant increases or decreases in revenue, changes in expenses, or unusual transactions may affect tax planning and are worth discussing before year-end.
Document business expenses as they occur
Waiting until tax season to reconstruct an entire year of expenses can create unnecessary work.
Record business expenses consistently and retain appropriate supporting documentation throughout the year.
Good records make it easier to understand what was spent, why it was spent, and how the transaction should be handled when the books and tax return are prepared.
Pay attention to significant business changes
Major changes in a business can have accounting or tax implications.
Examples may include purchasing equipment, hiring employees, using independent contractors, taking on financing, adding or removing an owner, opening another location, or making substantial changes to the way the business operates.
Discussing significant changes when they happen can provide more time to understand their financial and tax implications.
Review your situation before year-end
A year-end review can be more useful when it happens before the year has actually ended.
At that point, you can review current financial information, estimated payments, significant transactions, and any changes that occurred during the year.
Depending on your circumstances, there may still be matters that can be addressed before the calendar closes.
Stay in communication during the year
Your accountant doesn't have to be someone you speak with only when a tax return is due.
Periodic conversations can help keep financial records organized, identify questions earlier, and provide an opportunity to discuss changes in the business before they become urgent.
The appropriate frequency will depend on the complexity of your finances and how quickly your business changes.
Make tax planning part of the routine
Year-round tax planning isn't about trying to predict every detail of a future tax return. It's about maintaining good records, understanding where your finances stand, and addressing important questions while there is still time to act on them.
A consistent approach throughout the year can make tax season more manageable and give you a clearer understanding of your overall financial picture.
General information only: This resource is intended for general educational purposes and is not individualized tax, accounting, legal, or financial advice. Tax rules and planning considerations vary depending on individual and business circumstances.