“How can I save on taxes?”
I hear that question a lot, usually during tax season. That’s usually directly following the client finding out how much they owe in taxes.
Let’s actually start there. If you get a refund, it’s not a gift from the IRS or your state. It’s a REFUND. If you get change back at the store, do you celebrate and go nuts? Of course not. Someone has just given you some of your own money back. That’s all a refund is. It’s YOUR money coming back to you. But not all of it, and without so much as interest, let alone a thank you.
A refund means you didn’t plan very well.
If you owe money, that might be a shock, but at least it means that you didn’t give the government an interest free loan of YOUR money. On the other hand, the government will charge you interest because you waited to pay them. Some of my clients hate paying that interest. Others look at it as a low cost way to fund other projects. Typically the interest is higher than a home mortgage rate but less than a non-collateralized loan.
In either case, though, the time to worry about how much your taxes will be is not during tax preparation. It’s at least a year in advance. Most tax plans for the rich start 3-5 years ahead of execution.
It starts with a strategy. What do you want? Where are you now? How will you get where you want to be from where you are? In my firm, that all starts with a consultation if you want the fast track. If you want to learn along the way and take a slower path, join the coaching program and develop your own strategy with the knowledge you gain.
The next step is implementation. Take your well-thought-out strategy, turn it into actionable steps and then put it in place. In the case of a tax strategy, that usually will mean you need the help of some legal experts and tax experts. You may set up new business structures, pension plans, tax-free benefit plans or do a better job of tracking business deductions. You may change up the structure of a flow of income, move your nexus or turn your ideas into cash flow and tax-free wealth building strategies. Whatever it is, chances are you can’t do it yourself. Or more to the point, you shouldn’t do it yourself.
The final step is compliance. That means filing your tax returns and other legal documents that you need to keep your strategy on track and on point
If you try to start at the last step, compliance, you’ve missed the vital steps of strategy and implementation. You will always pay more in taxes
Want to change your cash flow, your wealth-building or create tax savings? It all starts with strategy.
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