Business owners and entrepreneurs need to reimagine entrepreneurial success and keep it simple, practical, and powerful.
Although tax isn’t always practical, the practical part is being able to have a better understanding of what needs to be done as well as when and how it needs to be done.
Now, there’s a big difference between just thinking you're doing something for the IRS and figuring out what you need to know so you pay the least taxes as legally possible.
With that being said, you need to become a planner. It’s not just on your tax pro to be a planner.
Understanding the Difference Between Tax Compliance and Tax Planning
Tax compliance is doing all the things you have to do to stay on the right side of the law and IRS. As tax pros, their job is to help you pay as few taxes as legally possible. Compliance is everything contained in that word “legally.” They don't want to jeopardize your ability to remain free and earn income to support you and your family.
The tax planning aspect, on the other hand, involves figuring out how to reduce your tax burden since you've already done the compliance part. That includes looking for possible ways to defer payment or make it go away permanently. It's about looking at where you are now, where you're headed, where the tax code is going to intersect you each year, and what the tax pros can do about that.
What Your Tax Pro Needs to Know
On top of the basic information that you need to give (names, addresses, and social security numbers), tax pros need to find out if you are in any unique situations.
Maybe you have a resident alien family member, spouse, or non-resident alien spouse. They also need to be made aware of changes you've made. They could look at your last year's tax return but some situations may have changed.
You may be self-employed but now work out-of-state. Maybe you got married, separated, or divorced. Maybe you adopted a child. You also need to report your income as well as any charitable contributions you’ve made.
Those are all big life changes that tax pros need to know about because they could affect your tax situation.
Ultimately, tax is a service, not an event. It’s a year-long process, not just a one-time event. If you can get your mindset shifted around that, it could really change the game and the results.
If you want to learn more about the things your tax pro should know about, check out 059: What Your Tax Pro Needs To Know For Tax Planning
