Why Tax Preparation is Strategic
Potential clients tell me far too often that they aren’t really getting strategic thinking from their current tax professionals. I typically ask them some questions to describe their experience and am usually met with things like: “They don’t bring me ideas,” “My tax bill is always a surprise,” “I just feel like I pay too much”. These complaints point to a complete disregard for tax strategy.
Strategy Can Safeguard Your Taxes
Some think that the process of preparing and filing tax returns is a data entry exercise. Take the number from provided form A and put it in the correct place on tax form B. There is no substitute for accurate data entry. You have to go one step further, though, or all that data entry is for naught.
For example, I spoke to a new client today who had a tax return prepared by a competent and reputable firm. Something immediately stuck out: Why had they used the funds from their Health Savings Account for non-medical expenses? He replied that of course he had used HSA funds for medical expenses. All tax software is different, but all of them have a way to indicate that the funds were used properly. This firm did not check that box and the client owed full income taxes as well as a 20% penalty resulting in $4,000 in additional taxes.
Strategy Can Save You Thousands
A strategic tax partner can help steer clients on the right path, even on the fly. No client tells their professional everything in advance and items of strategic importance can get buried in paperwork, but it takes a professional with a keen eye to save their clients big.
Once I had a client who had a large upcoming company sale. We received the full list of fixed assets right in the middle of preparation time. It takes a skilled tax professional to carefully read the purchase agreement and get the right values assigned to the right assets. I was able to amend their return and get them a $100K refund by correcting the valuation of certain assets. The previous preparer had assigned too much of the purchase price to goodwill and not enough to the fixed assets, causing too much gain to be recognized.
Tax Preparation Needs Strategy
In my experience, preparation and strategy go hand in hand and cannot be separated. My client is always top of mind as I am preparing their return. I think about what I was able to forecast for their tax liability and I ask myself whether or not this return reflects what I expected to happen. If not, I stop and ask why. And if I’m unable to explain why, I’m not done preparing the return. It’s really just that simple.
Is your tax professional preparing your return strategically? Do you have not just a tax plan but an accurate forecast of your expected tax liability? Did your last return meet up with your expectations? If not, did your tax professional take the time to help you understand why not?
Wildalea is a full-service provider of tax strategy and strategic tax preparation to make sure that you are only paying your fair share of taxes. It’s our goal to remove surprises, communicate effectively and minimize your tax bill within the clear lines of the tax code. Keeping you educated, informed and compliant. Get in touch about your tax strategy at www.wildalea.com.
