Tax planning doesn’t happen once a year.
For many people, taxes become a priority when it’s time to prepare and file the annual return. But effective tax planning happens throughout the year.
A change in employment, a new salary, marriage, changes in withholding, or other financial decisions can affect your tax position well before it’s time to file.
For example, when someone starts a new job, reviewing the employee’s Form W-4 and withholding can help determine whether enough is being withheld based on their circumstances. Marriage can also change how income and tax brackets factor into the overall tax picture.
These may seem like individual events, but they are part of a much larger financial picture. That is why ongoing communication with your accountant matters.
Preparation is only one part of the relationship.
I often compare accounting to legal services in one important respect: you may not always know when you are going to need professional guidance, but when a situation arises, having someone who already understands your circumstances can be extremely valuable.
An ongoing accounting relationship can encompass advisory services, tax compliance and regulatory considerations, planning, and preparation of the annual tax return.
Rather than treating each of these as an isolated event, we have the opportunity to look at them together.
That means reviewing changes as they occur, staying current with changes in tax law and regulations, evaluating how those changes may affect a client, and planning ahead when appropriate.
The goal is to be proactive.
Preparing an accurate annual return is important, but by the time a return is being prepared, much of the financial activity for that tax year has already occurred.
Planning gives us an opportunity to have conversations earlier.
Are your withholdings appropriate? Has something changed in your income? Could a change in your personal or professional life affect your tax situation? Are there changes in tax law that should be considered?
Those are conversations worth having before tax season.
Ultimately, the value of an ongoing accounting relationship is having someone paying attention throughout the year, not simply when a return is due.
Tax considerations arise every day of the year. Good planning means looking ahead, evaluating changes as they happen, and doing the work necessary to help avoid unnecessary surprises.
Changes throughout the year can affect what happens when it’s time to file. Having an accountant who understands your circumstances makes it easier to address those changes as they occur.
