What is tax planning? Tax planning is the process of reviewing your financials and preparing for the tax season ahead before it arrives. So often, accountants get caught up in their work and don’t have time to work with their clients on next year’s taxes, so they result in year-end tax planning. This leaves the client to tax plan for themselves which can be great, but it can also lead to mistakes. We’re going to discuss the tax planning mistakes you should avoid so you’ll create less stress for yourself and your CPA.  

The Wrong Amount of Cash in the Bank 

One crucial mistake you need to avoid in tax planning is having the wrong amount of cash in the bank. You should always be aware of what is or isn’t in your bank account. This way you can plan accordingly for investments, expenses, income, or any other financials. Not having enough money in the bank can hurt your business but having too much can as well. 

Lack of Cash Flow Planning 

We’re not the first to admit that cash flow planning can be difficult for a business. You don’t always know when a client is going to pay their bill or if they’re going to pay at all. However, once that money does reach your account, you need to be strategic in planning where it will go or what it will be spent on. Without careful planning, you could find your account being overdrawn when a client doesn’t pay you when you expected. This leaves you wondering how you’ll pay your rent for the office space or how you’ll run payroll. Cash flow planning is important for your organization and should not be overlooked.  

Not Tracking Expenses in Time 

Not tracking your expenses can leave you with problems when it comes to your taxes. Why? Because you’re missing out on tax deductions or tax credits that you could have earned had you tracked your expenses for the whole year. Business owners tend to procrastinate and leave tracking expenses for right before the tax deadline, but you should avoid this. By avoiding it, you could lower your tax liability or receive a larger refund on your return.  

Lack of Preparation Before Meeting Your CPA - Not Preparing Before You Meet with Your CPA 

Not preparing before a meeting with your CPA can hurt you and your CPA. It could become a waste of time for your CPA, and you’ll leave having more questions than you started with. The smartest thing to do is come ready with your financials and your questions, so you have a plan for the meeting. Your CPA will appreciate you coming prepared, and both of you can spend the time of the meeting being productive with tax planning rather than trying to get organized.  

Not Taking Advantage of Available Resources (Chance to sell in the article, closing point) 

There are many tax resources out there that can help answer your questions or keep your information organized. If you are stressed about your taxes or are concerned with keeping track of your documents, look up what kind of resources are out there. BaCo Group would be a great resource for you if you are concerned about those things. Our CPAs would be happy to sit down with you and answer your questions, and we have unique, patented technology that keeps track of your information, so you don’t have to. Our software updates every night throughout the year, so you don’t have to keep your documents from 2020 until the end of 2021. We work on 2021 taxes in 2021. If you’re looking for resources to help you with tax planning, BaCo Group is the CPA firm for you. Contact us today to learn more about the various services we offer our clients!