What the heck is tax planning anyway?
We’ve been talking a lot about working more proactively with our tax clients, but what does that really mean for you? What’s the difference between a tax projection, a tax plan and a tax strategy? Here’s the TL:DR
First things first, let’s get our terminology straight! We’ll be tossing around a lot of terms throughout this explainer, so we’d like to start with a little explanation of what these different types of work mean:
Tax projection - This answer the question “I did this, how much tax do I owe” We’ll take the information you provide and running the calculations to determine how much tax would be owed in that situation. Since these things have already happened, we don’t have many tools to reduce the tax retroactively, which is why we’re encouraging planning and strategy!
Tax planning - This answer the question “I’m going to do this, how much tax will I owe” This is kind of like a projection, except it’s for things that haven’t happened yet! Typically we’re doing planning to calculate the tax that would be due under a set of circumstances, such as planning for the upcoming year, planning for multiple scenarios for exercising options, or the impact of an important decision. The goal of a tax plan is to gather information about potential tax payments to make a decision, and identify if there’s an opportunity to be more strategic.
Tax Strategy Session - This answers the question “Is there a better way to do this to save in taxes?” Where a projection and a plan are primarily about calculating the tax due in one or multiple scenarios, a tax strategy session is a deep in-depth dive into your finances with the objective of finding ways to reduce your overall tax burden. We’ll typically start with a discovery session to gather as much as we can about your financial world, and then come back with some recommendations of changes to the way you’re currently doing things with the goal of reducing your potential tax bill.
Why are you encouraging more tax planning? We’re currently doing our best work with clients that regularly engage us for planning in addition to their regular tax compliance work, so much so, that going forward we are looking to move to only working with clients that engage us for planning. By working up a strategy throughout the year, we’re able to project out remaining tax balances, set a plan for the start of the following year, and identify clients that are a good fit for more in depth strategy sessions.
Haven’t you already been doing this for me? Well, yes and no. In the past, we’ve automatically calculated the upcoming year’s estimates based on the prior year, in some cases made adjustments, and we’ve worked with some of our clients on projections and planning throughout the year. We’ve always made our best effort to identify opportunities for our clients to save, but as we move to a “Proactive Only” firm, we’re expanding all of our tax relationships to include at least once a year projections or planning. The goal is to start these conversations while we’re still in the year, so if there’s an opportunity we have the time to take advantage of it.
How can I make the most of these planning services?
Planning isn’t something we can do for you, it’s something we can only do with you. Organized clients that regularly track their income and expenses, pay their estimates, make plans for the future and read our regular emails will get the most out of our new model. If that doesn’t quite sound like you, don’t worry, we know and we still love you. We’re crafting some process to help clients that may not have been used to working that way transition so they can get the benefits of this work as well, but understandable we’ll be focused on our most prepared clients first.
When you engage us for tax planning here’s what you can expect:
A pre-scheduled meeting in the fall to review your financial year
Calculations for your expected current year tax, including a revised Q4 estimate, remaining balance due, and baseline quarterly estimates for the upcoming year
a discussion on some of the relevant tax law changes that are affecting you or creating opportunities for you this year or next
If you’re a good candidate for it, an invitation to dive deeper and work on tax strategy together
To accomplish that, we’re going to need a little more from you than we may have in the past:
We’re going to start scheduling our fall planning on a first come, first choice basis, so whether you want to meet in early October, or Late december, the sooner you engage with us, the sooner you’ll get to secure your spot. We’ll have just enough spots for our new capacity so book quickly. If you wait too long to book and there are no spots, your projections will be completed via email only and scheduled meetings will be taking priority in our work queues.
When you sign up, we’ll send you a worksheet and a list of items you’ll need to put together to get the most out of our session together. This will be about as much work as you put in to prepare for your completed tax returns, so please make the space in your schedule to have this ready!
If you have questions you’d like to address on the call, please provide them in advance so we can be prepared
Three weeks beforehand, we’ll check back in to be sure you’re ready if we haven’t gotten your info and/or to get updates if things may have changed.
If we don’t have all your requested info by two weeks before the meeting, or answers to our open question by a week before the meeting, we’ll need to cancel and reschedule. Reschedule spots will be limited, and subject to a $250 reschedule fee at our discretion.
How much in tax should I expect to save by doing tax planning? Planning is about the long term, so as we’re working with you on your fall plan, we’ll also be compiling what we’re internally calling your “tax roadmap”. Sometimes planning might uncover something we can tweak or implement right away, but more likely we’ll be preparing a solid base of information to help us identify and implement strategies more effectively in the future. When we connect, whether it’s a quick email question, or a full tax planning meeting, we’ll be looking back at that tax roadmap so we’ve got a fuller look at your financial picture when we answer questions and make recommendations of strategies.
I’d like to meet more frequently, is that an option? While we think a lot of our relationships will do very well by adding in this fall meeting, we are offering a quarterly check in option for clients that are in dynamic points in their financial world and need a more frequent meeting . These spots are very limited, so if we think you’re a good candidate we’ll reach out with that option.
Can we still meet at other times during the year? I’ve always operated with a kind of “Open door” policy on setting meetings, which I love and I think encourages good clear open communication between us. To do my best work in this new model, however, I’m going to be a lot more structured with my time and reserving my call space to pre-scheduled events. I will be significantly limiting the number of extra calls I take so clients who have pre-booked their time get my full focus and attention. I will also be delegating emails and calls to staff members as appropriate so my pre-scheduled calls are getting my full attention.
Anything else I should know? We’re really excited about this new way of working, but this isn’t something we can do for you, we can only do it with you. These changes are just some of the first steps as we move towards a “proactive only” firm, and this isn’t the kind of shift anyone else in our field is making yet. Since we’re heading down this unpaved road we’re expecting to encounter a few bumps and we appreciate your feedback and patience to help us all get to the goal of strong proactive relationships that save you taxes and reduce stress!
If you were redirected here from the Proactive Firm Signup Page, please don’t forget to go back and submit your application to continue working together!