Hindsight may be 20-20, but that doesn’t help you when it comes to taxes. Too often, individuals and businesses end up with an unpleasant surprise at tax time because they failed to plan.
When tax planning should begin
Tax planning should begin in January of the current tax year. As your SF Bay Area tax adviser, Suzanne will take a look at your financial picture and recommend a strategy for avoiding a big tax bill. This may include deferring income to the following year, pre-paying expenses and contributing to a retirement fund.
If you’re anticipating any major life changes, these need to be factored into your tax planning as well. Events that could impact your tax situation include divorce, marriage, selling a large amount of stock, selling a business, income property or a home. By getting advice upfront, you’ll know the tax ramifications of your actions so you can make informed decisions.
Some real life client examples
Selling a rental property
J.R. sold a rental property and deposited the proceeds into an investment account. By the time he came to Suzanne to discuss tax planning, it was too late. He was dumbfounded by the tax he had to pay.
Selling a business
S.B. sold her business, but never mentioned her intention to do so. She waited until after she sold it to ask, what do I do now? Sadly, the answer was “not much.” Had she sought advice first, Suzanne would have advised her on how to sell the business to lower her tax obligation.
Selling real estate in a partnership
One partner (A) wanted to sell the property, the other (B) didn’t. Because B couldn’t afford to buy her out, A prevailed. The building was sold and the partners split the funds. The deal was a loss for B, meaning he could deduct the full amount. He had been misinformed by the real estate agent who told him he could only deduct $3,000 a year. When he consulted Suzanne, she advised him that he could take the entire loss as long as it was a section 1231 property and held longer than a year.
Before you cash in that stock you’ve owned for 20 years, ask Suzanne to compute your gain/loss. If it nets out to a gain you will owe tax on the entire profit, but if it nets out to be a loss you can only deduct $3,000 each year.Whether you’re contemplating a major life change in the year ahead or you just want to make sure you’re on track to maximize your deductions and minimize your taxes, contact Suzanne for strategic tax planning, now.