A tax strategy is a step-by-step action plan that ensures you are paying the least amount of tax allowable by law, regardless of your business or investment situation.
A tax strategy is comprehensive. It considers:
– Your personal and financial goals and dreams
– Your business, your investments and your family situation
– How your businesses and investments are owned
– The appropriate entity structure for your business and investments
– Your current situation to uncover deductions and other permanent tax saving opportunities
Those who are most successfully in their tax strategy make it a part of their every day activities. To them, a tax strategy is not a one-time event. Rather, it is something that becomes part of their routine.
A tax strategy helps you to view your every day activities in a different way – one that works toward the goal of permanently reducing your taxes.
The reality is that just about everything you do can have an impact on your taxes. So, why not make sure that impact is a positive one?
– Receiving money from an entity you own
– Putting money into an entity you own
– Having a meeting with partners, vendors or advisors
– Buying or selling investments
– Having an important discussion about your business or investments
The above items are activities you probably already do on a regular basis. By keeping your tax strategy in mind while doing these activities, you can improve the results of your tax strategy – all without having to do anything out of the ordinary.
Unless you have your tax strategy in mind, it is easy for this ordinary transaction to have a negative impact on your taxes.
You may pay for business expenses personally and forget to have your business reimburse you – this means the expense gets missed as a tax deduction.
When you keep your tax strategy in mind, it will be routine to have your business reimburse you. Or, even better, it will feel wrong to not have your business pay for the expenses in the first place.
Your tax strategy maps out the best way to take money out of your entity. Making sure those payments are treated as they are supposed to be, should be part of your every day activities.
For example, if you are receiving a salary, it should look like salary. This means it’s paid on a set schedule (weekly, bi-weekly, bi-monthly, monthly, etc.) and the proper taxes are withheld.
Similarly, if you are taking a distribution, it should look like a distribution. Distributions are usually not paid more frequently than quarterly. Also, distributions are usually not a set amount as they are typically tied to the profitability of the entity. If your distribution is paid every two week, it looks more like a salary and this can have a negative impact on your tax strategy.
Keeping this in mind, as you receive payments from your entity, helps the success of your tax strategy.
All of these are great to have documented in the form of meeting minutes. Meeting minutes provide tremendous support for deductions, investments and business purpose – all of which help the success of your tax strategy.
It is the every day activities that make tax savings a reality.