The Power of Proactive Tax Planning with a CPA

Proactive tax planning is a strategic approach that extends far beyond the typical year-end rush or last-minute scramble. For those accustomed to working with a CPA, consistent communication is key to proactive planning. It's crucial to keep your CPA informed about any significant changes in your income or to discuss major decisions before they're set in stone (i.e., purchasing rental property or selling your business). By embracing proactive tax planning, you position yourself to take full advantage of potential tax benefits while avoiding costly oversights.

Working with a proactive tax planning CPA provides many benefits, including:

Maximized Tax Reduction: A proactive planner can analyze your unique situations and develop a customized tax plan that maximizes your deductions and credits. A proactive tax planner can also help defer income if appropriate.

Future Tax Liability Management: No more surprises in April. Income can fluctuate annually and if you have a good year, you should expect to owe more taxes. A proactive tax planner can help minimize surprises so you can manage your cash flow.

Informed Decision Making: Proper tax planning can help you make more informed decisions regarding investment and retirement planning. A proactive tax planner can take a holistic approach and work with your financial advisors to make sure other aspects of your financial plan are considered before making any tax-related decisions. 

Risk Mitigation and Compliance: A proactive tax planner will make sure you are fully compliant with the latest tax laws and regulations, reducing the risk of audits and penalties. It takes years of experience for a CPA to become familiar with the complex and extensive Internal Revenue Code, Regulations, and various other authorities to be proficient in tax. On top of that, there have been many changes (and retroactive changes) over the past few years that require CPAs to constantly stay informed. There will most likely be changes in the upcoming years as well. 

These benefits make a proactive CPA more than just a historian of your prior year income and deductions. Below are some ways that highlight how a proactive tax advisor works: 

Year-Round Communication: It’s hard to do any planning if you only communicate with your CPA at tax time. Communication is key and a proactive tax professional will initiate planning conversations with you and do regular check-ins. These regular check-ins will help establish a good relationship and your CPA will have a good understanding of your goals and situation so they are also not caught in surprise. 

Continuing Education: A proactive tax CPA will stay informed and updated about new tax laws and regulations through various different sources. From there, they will be able to apply the most up-to-date knowledge to your specific situation. 

Leveraging Technology: A proactive tax CPA will embrace new technological changes to help better serve clients. This can include a better communication platform, enhanced security from cyber threats, and the use of AI-powered tax research tools. 

If you are considering either working with a CPA for the first time or looking for a change in relationship, it is important to understand how they operate and if they are proactive. Make sure you understand their processes, the scope of the services, and their area of expertise. Partnering with a proactive tax advisor brings lots of benefits including maximized tax reduction, cash flow management, improved decision-making, risk mitigation, compliance management, and peace of mind. 

Contact Amanda Luke, CPA, PLLC to see if you are interested in working with a proactive tax advisor!