- Cadence
- Continuous, with a review before year end
- Output
- Written recommendations, then implementation
- Not
- A subscription, and not aggressive positions
Tax planning, done while it can still change something
Structure, compensation, timing and elections decided in advance and documented at the time. Not a conversation in April about a year that has already closed.
- Most common finding
- An S election that should have been made, or one that should not have been
April is a reporting exercise. The decisions were made months earlier.
Most business owners meet their accountant once a year, after the year has ended, at which point the conversation is about what happened rather than what to do. The entity was chosen two years ago and never revisited. The salary was set arbitrarily. The equipment was bought in January when December would have been better, or in December when the deduction was worth less.
None of those are exotic strategies. They are ordinary decisions that were made without anybody asking what the tax effect would be, because nobody was in the room at the time.
Planning is simply being in the room. It is a smaller amount of work than people expect and it compounds, because a structure set up correctly keeps paying every year afterwards.
What we actually look at.
The levers that are actually worth pulling
- Entity and election. Whether an S corporation election saves more than the payroll it requires, run against your real numbers rather than a rule of thumb.
- Owner compensation. The split between salary and distribution, set deliberately and documented at the time.
- Timing. Which income and expenses fall either side of year end, decided in November rather than discovered in April.
- Retirement structure. The plans available to an owner operated business are more generous than most owners realise, and the deadlines to open one are earlier.
- Accountable plans. Reimbursing yourself properly for home office, vehicle and equipment instead of hoping a deduction survives.
- Multi state exposure. Where the business has created a filing obligation it did not intend, and what to do about it.
- Owners living abroad. How a US entity is taxed when the owner is not a US person, which treaty positions are available on the US side, and what your accountant at home will need from us.
Common questions
Continuously, with a substantive review well before year end. By the time a year has closed, almost every lever has already moved. The single most common thing we are asked in April is whether anything can be done about the year just ended, and the honest answer is usually very little.
Below a certain profit level, no, and we will say so. The S corporation election in particular costs money to maintain and only pays for itself above a threshold. We would rather tell you to wait a year than sell you a structure that costs more than it saves.
No. We take positions we can document and defend, and we will explain why a scheme you have read about is either not applicable to you or not as settled as it was presented. If a strategy depends on nobody looking closely, it is not a strategy.
A review of the current structure and the year to date numbers, a written set of recommendations with the expected effect of each, and then the implementation, which usually involves elections, payroll changes or registrations. It is a piece of work with a start and an end, not a subscription.
Related
Want the year end review before the year ends?
The useful conversation happens in the autumn. April is too late to change the answer.