This is why you need a Tax Strategy

You probably know that you need a tax strategy, but chances are that you don’t know where to start. The word tax is often associated with a negative bias through years of incorrect information. To set the record straight, you should know that tax strategies have one fundamental objective: your increase in wealth.

Let’s be clear. Your focus is on scale and growth as a business owner or investor. And that’s where it should be. You, undoubtedly, want to become wealthy, secure, and financially independent, and you’ve explored various ways to achieve that goal.

Understandably, taxes aren’t the go-to factor when you think of wealth creation, but we’ll have you know that the correct tax strategy can incur substantial financial rewards. Unfortunately, you may feel as if taxes are beyond your control, especially since the only time you think about taxes is at the moment of paying them. This conditioned bias can make you feel like you’re on the wrong route. 

So, what is a tax strategy? 

Glad you asked. A tax strategy is an action plan for tax reduction, regardless of your business or investment situation. It is a strategy crafted to ensure you pay the least amount of tax allowed by law.

Tax strategies optimize the way your business income and personal spending are structured. It includes analyzing the structure of your business, payroll, income taxes, deductible expenses, and the most efficient support structure of the people and causes important to you. In addition, it will unpack how you can lower your taxes based on the current tax law by maximizing your deductions per your wealth strategy. Furthermore, this will shift income from high tax rates to reduce tax rates and maximize tax credits.

You should know that tax strategies differ from CPAs’ typical practices. Having a tax strategy is a projected vision for your financial future. As such, your tax strategy should be designed for the long term and the present.

So what is the best way to create a tax strategy?

Visualization of your results

Progress begins with a dream, a vision, a desire. So ask questions like where are you today, and where do you want to be in the future? More importantly, what’s stopping you from getting there? For example, imagine your financial freedom and ask yourself, what does financial freedom look like to you? By asking these questions, you begin to visualize your results, and then you can create a path that you may have thought was initially out of reach.

It’s a simple goal-setting process, and your goals for wealth — from your business and investments — shape your future. So, inevitably, goal-setting will heavily influence your tax strategy and provide a foundation for your plan.

You should know that a successful tax strategy should be designed around a holistic and detailed look at the goals you have for your business, investments, and even family. Be sure to never settle for a tax strategy that doesn’t align with your goals in all of these areas.

Roll out your entity map starting with a review

Your future goals are dependent on your past and present initiatives. So be sure to dive into a detailed review of your existing ownership structure to determine the needs that must change from tax and asset protection standpoints. Strategy requires the truth regarding your situation, so be sure to encompass all you find in your facts. 

As your strategy begins with identifying the current facts, it is also about how your business and income are structured. By understanding these facts about your business and how it fits into the regulatory bodies of federal, state, and even local entities and how tax laws affect your bottom line, you will be able to develop actionable goals that are not just identifiable but also obtainable.

You should know that up to 50% of your tax incentives depend solely on how you tax your entity. 

Your tax strategy must include an in-depth evaluation of your business and personal tax situation. After assessing your current entity structure, you will identify the entity you should use now and how it should be taxed. You will also determine how to organize and register your entity for income tax.

This methodology will determine where your money goes and dictate the utilization of your funds.

Consider your deductions

Now that you have an entity map, your strategy’s next step will undoubtedly be your tax deduction. Here you will identify deductions you aren’t claiming yet and lay out your plan to ensure that you do.

We get it. You’re uncertain about deductions due to perpetuated and often incorrectly based reputation. You’re not alone. You want to avoid a painful audit. However, you should know that deductions exist specifically to incentivize certain behaviors in taxpayers. They exist for your use. It would be best if you simply took them properly.

Understanding how to use your existing and new entities to maximize and protect your tax benefits in your day-to-day operations is crucial. In addition, you’ll pinpoint how to claim and document business and investment expenses properly.

You may find that you have expenses you are paying for out of pocket that, if properly structured and documented, should be paid from your business. Once you discover this, you will have found a permanent method to reduce your tax obligations.

Do you see why you need a tax strategy?

By now, you’ll note that, like every aspect of your business, your tax situation will significantly improve when you take a strategic approach. An effective strategy can help you shift from having taxes as one of your most exorbitant expenses to becoming your biggest asset. Ultimately, every dollar you save in taxes can be reinvested in your business. 

Creating a tax strategy forces you to clarify where you are at present from a financial point of view and then outlines the journey of how to get to where you want to be in the future. It also equips you with techniques to accelerate your progress. All it takes is setting up your business entities and investments in ways that best serve your goals. And you’ll save money by considering deductions as guidance rather than avoiding pitfalls.

Your tax strategy should evolve alongside your business. It should be adjustable according to various tax laws and ensure that you always pay the least amount of tax deemed allowable.

In conclusion, remember that your tax strategy is there to serve you and your financial goals. It’s not to confuse or overwhelm you. As professional tax strategists, we follow a dedicated and tailored system that can guide you through the process so that you can feel confident in your plans and decisions. So, to achieve peace of mind regarding your taxes, get in touch with us here to begin your journey.